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2009

StudyStudy on                          on Impact of Trade Competition Issues in  Liberalisation in the the Domestic  Information Technology Segment of the Air  Sector on Development

Transport Sector in  Administrative Staff College of India India  Hyderabad
Draft Report   Revised Final Report 
                                                                                        

2007
Administrative Staff College of India, Hyderabad

Competition Issues in the Air Transport Sector in India

Table of Contents
Sl.No Chapter Page No.

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Introduction ToR I ToR II & III ToR IV ToR V ToR VI & VII ToR VIII ToR IX ToR X ToR XI Conclusions and Recommendations References

1 4 15 29 30 43 91 99 120 121 126 129

____________________________________________________asci research and consultancy

ii

Competition Issues in the Air Transport Sector in India

List of Tables

Table No. I.1 I.2 I.3 I.4 II.1 II.2 II.3 II.4 II.5 II.6 IV.1 IV.2 IV.3 IV.4 IV.5 IV.6 IV.7 IV.8 IV.9 Calculation of HHI

Title

Page No. 12 12 13 16 28 17 22 25 28 28 29 30 32 32 36 36 37 37 37 38

Fleet Size of All Scheduled Airlines Order for Airplanes Net Profit/Loss incurred by Different Airlines City Pair-wise Herfindahl index of Pax. Carried in 2006-07 Passenger Load Factor for Indian Passenger Load Factor for Indian Slots on Delhi-Mumbai Route Average Age of Fleet Fleet Size of All Scheduled Airlines Descriptive Statistics for Price Data: Delhi – Mumbai Taxes and Surcharges on Route : Delhi – Mumbai Taxes and Surcharges on Route : Mumbai – Delhi Pre merger (2006/07)-Delhi-Mumbai (passenger wise) Post Merger(2008) -Delhi Mumbai (slot wise) Pre merger (2006/07)-Delhi-Chennai (passenger wise) Post Merger(2008) -Delhi Chennai(slot wise) Pre merger (2006/07)-Bangalore-Chennai (passenger wise) Post Merger(2008) -Bangalore- Chennai(slot wise)

____________________________________________________asci research and consultancy

iii

5 II.6 Net Profit / Loss of Different Airlines in 2005-06 14 II.Competition Issues in the Air Transport Sector in India List of Figures Figure No.4 II. 5 I.2 II.1: Entry and Exit of Different Airlines in India ____________________________________________________asci research and consultancy iv .1 Growth Rate Title Page No.2 Total Domestic Passenger Traffic Carried by All Scheduled and Non-Scheduled Operators of India Market share in Passenger Traffic of Various Airlines Market share in Passenger Traffic of Various Airlines Fleet Size of Operators in Indian Aviation Sector 10 11 11 13 I.3 I.3 II. I.8 II.5 I.Mumbai Period: 2006-07 New Delhi to Mumbai (July 2006) New Delhi to Mumbai (July 2008) Route2: Delhi-Chennai .7 II.Period: 2006-07 New Delhi to Chennai (July 2006) New Delhi to Chennai (June 2008) Route 3: Bangalore to Chennai Bangalore to Chennai (July 2006) Bangalore to Chennai (June 2008) 18 21 22 23 24 24 25 26 27 9 Chart I.1 II.9 Route 1: Delhi.6 II.4 I.

P. CCI and Dr Anil Kumar. Solomon Raju. Joint Secretary. DG. Mr Chattar Singh. Mr Augustine Peter.Competition Issues in the Air Transport Sector in India Acknowledgements The Study entitled Competition Issues in the Domestic Segment of the Air Transport Sector in India was awarded to the Administrative Staff College of India by the Competition Commission of India and the Investment Climate Advisory Service (FIAS) of the World Bank Group. We would like to thank Mr Kanu Gohain. Economic Adviser. Senguttuvan. Capt. The study team takes this opportunity to thank the CCI and the FIAS for awarding this study to the College. We also take this opportunity to thank Mr P C Sen. Civil Aviation for his extensive help in terms of making available all the relevant data to the study team. CCI. We thank Ms Rina Oberoi of the FIAS for her help in the course of this study. We also thank Mr K L Thapar. DFID for the very useful comments received from them during the brain-storming meeting. In particular we would like to thank Mr Vinod Dhall. Our thanks go out to Mr K N Srivastava. Competition Consultant. We also thank his team in the DGCA comprising of Mr Dinesh Kumar. Director. Deputy Director (AT-2). We thank Mr H S Khola. Airports Authority of India and Prof. In the course of writing this report we received a great deal of assistance and support from a large number of experts and resource persons. Director General. Director. Asst. Asian Institute of Transport Development for the extensive help he provided to the team in the course of the study through discussions and sharing of information and Mr Tulsi R Kesharwani from the same Institute for spending long hours with the study team discussing and clarifying relevant issues. former DGCA for painstakingly taking us through complex issues relating to the sector. We thank Mr. GM. A special note of thanks goes to Mr Augustine Peter for advising and guiding the team right from the start of the study. We also thank Ms K Usha Rani and Ms Swarupa Rani. Director-Air Transport (AT-2). DTE of Regulation & Information for their help in data collection. Corporate Planning. Ms Tuhinanshu Sharma. Mr Sunil Chowdhary. Ministry of Civil Aviation for his guidance. A K Harbola. Member and Acting Chairman. Research Associate and Ms Deblina Dutta for their help in data compilation. Airports Authority of India for their help. and Mr John Preston. We place on our record our appreciation and thanks to Dr Shyam Khemani of FIAS. Director (AT-2). CCI. Mr Amitabh Kumar. We thank Mr D P Singh. Stenographers for their help in typing and formatting of the manuscript. Assistant Director (R). India International Centre for his advice and guidance.S. CCI. Paramita Dasgupta Project Leader Raj Ponnaluri Team Member Ashita Allamraju Team Member ____________________________________________________asci research and consultancy v .

Competition Issues in the Air Transport Sector in India ____________________________________________________asci research and consultancy vi .

Market Share as of Q1 FY 2006 Go Air Others 2% 1% Spice Jet Air Deccan 6% 19% Kingfisher 8% Air Sahara 9% Indian 21% Jet Airways 34% From the year 2003 onwards the perception of air travel changed. There appear to be major corporate restructuring measures underway in this sector mainly in the form of mergers and acquisitions (M&As). In 1986. This led to entry of Jet. air travel in India was perceived as an elitist activity and there was restricted growth in the industry. As a result. NEPC. The total industry losses for the year 2006-07 were over USD 500 million. Also there has been intense price competition that has resulted in discounted fares. this intense price competition led to losses for the airlines. including Kingfisher Airlines. Paramount and Go Air. The recent mergers of Indian and Air ____________________________________________________asci research and consultancy 1 . private sector players were permitted as air taxi operators. For many years. The Air Corporation Act 1953 led to nationalization of the airlines services. promotional offers and introduction of flights to newer destinations. East-West & Modiluft. With the passing of the Air Corporation Act 1994. There has been a large increase in passenger traffic. this sector was opened up and private carriers were permitted to operate scheduled services. Air Sahara. However. The co-existence of full service carriers and low cost carriers has also given the consumer a wide choice of service on the market. the market structure in the air transport sector is undergoing rapid changes. While six operators were granted license only Jet and Air Sahara were able to start their services. Aviation became more affordable. large and small on to the market. the year 2003 marked a watershed in the history of civil aviation in India with the entry of low cost carriers like Air Deccan and Spice Jet.Competition Issues in the Air Transport Sector in India Introduction Background The air transport sector in India has undergone massive changes in the last decade. This was followed by entry of other private airlines. Consequently the assets of nine existing companies were transferred to two entities in the aviation sector controlled by the Government of India – Indian Airlines and Air India. However.

It is in fact argued that such consolidation is needed in order to ensure efficient and sustained functioning of the airline operators. It is perceived that this may lead to anti competitive practices on the market with some large players dominating the market. the study will provide a market overview. on the other. This study has been undertaken in the above context. the growth of the industry in terms of passengers and number of flight operators on a macro level. The changing market structure has provided a new competitive dimension to the industry. tracing the history of evolution of the aviation industry in India. the industry is now left with nine players of which three are big players and the remaining are small ones. Kingfisher and Air Deccan and Jet and Sahara have led to an industry structure which is sufficiently concentrated to raise a fundamental question about whether the operation of market forces are adequate to prevent the abuse of market power. space. 2. and the benefits of the combinations in terms of ‘efficiency mergers’ outweigh the costs or adverse effects in terms of anti competitiveness. from being till recently an industry with around twelve players involved in stiff competition. Scope of the Study The study will look at the issue of competition at two levels – air transport and airports. Terms of Reference The following are the Terms of Reference of the Study. and outline issues for advocacy for India’s Competition Commission. Thus as a result of the ongoing M&As. Provide an assessment of the degree of competition in the relevant market in terms of key features such as time slots. that there is need for assessing whether the changing market scenario. 3. combinations like M&As currently occurring in the sector may improve efficiency in the sector in the form of higher productivity and lower costs. they may lead to abuse of market power and anti competitive effects. It is expected that as a result of the M&As taking place and resultant scale economies. Broadly. discuss any significant anti-competitive practices by various players and their effects. The role of the Competition Commission becomes important in the current scenario in this sector in the sense. etc. The competition assessment of M&As in the air transport sector is generally more complex than in many other economic sectors because of the nature of the industry. outlining among other things. address implications of this study for Competition Policy and Law in India. ____________________________________________________asci research and consultancy 2 . However as a result of the M&As. 1. which was earlier open to many players thereby enhancing competitiveness. The two issues will be dealt with separately in the study. Thus while on the one hand. the nature of the market. We are pleased to present the Revised Final Report of the Study. is now changing.Competition Issues in the Air Transport Sector in India India. this study will focus upon analyzing the nature and degree of competition prevailing in the passenger segment of the domestic air transport sector and will provide recommendations for appropriate action that may be taken by the Competition Commission to preserve and foster a competitive environment. Provide a literature review. Given the above context. thereby leading to enhancement of profits. Discuss the concept of relevant product and geographic market in the passenger segment of the domestic air transport sector. efficiency and productivity will increase.

Study issues relating to cartels. In addition. However. in the context of the above three areas. abuse of dominance and regulation of combinations will be analyed. 10. Provide an assessment of the significant anti-competitive practices in the air transport sector on the lines of the Competition Act 2002. Relevant reports were also collected from DGCA. 5. Three major areas. Examine issues relating to advocacy for the Competition Commission of India. should be analysed for the domestic segment of the air transport sector in India. 8. In this context. prohibition of abuse of dominant position. Over and above this. namely. Evaluate the intensity with which most airlines carriers operate between city-pairs. It may be mentioned here that all times. 9. Information on flight-wise passenger load factor was also sought. Secondary sources including articles and books on the subject were consulted as also web based information. ____________________________________________________asci research and consultancy 3 . anticompetitive agreements as well as regulation of combinations. recognizing that the previously allotted slots mechanism to various air carriers at airports in and of itself creates a superior position in the competition ladder. secondary data analysis.Competition Issues in the Air Transport Sector in India 4. the three major areas of the Competition Act. such data was available only for Indian Airlines. Study the issue of competition in air ports. Evaluate operations at various airports and the role played by previously allotted slots in creating competitive advantage. reports prepared by other organizations were consulted. Ministry of Civil Aviation and Airport Authority of India. analysis of information collected from stakeholders and interviews with resource persons and experts. the legal provisions in these countries and the issues emerging in terms of competition policy there from. Hence any analysis on PLFs is done only for the Indian Airlines. namely anti-competitive agreements. cases of cartels in countries like US and the UK will be studied to examine the type of offences. Data relating to price of ticket as also the taxes & surcharges were collected from the websites of individual airlines. To the extent possible. Examine. 6. 7. in order to enhance competition. Provide appropriate suggestions and recommendations. Analyse the Implications of this study for Competition Policy and Law. Methodology The methodology for the study consisted of primary data analysis. In this context. Draw necessary comparisons wherever relevant in the Indian context. Detailed methodology for each TOR is spelt out in the relevant sections. the Competition Assessment Framework has been used as the methodological framework for the study. 11. Route-wise monthly passenger data for each airline was collected for the period April 2006-March 2007. Appropriate recommendations and suggestions should be made for the air transport sector. individual interviews were conducted with major stakeholders. the ASCI research team has worked closely with the officials of CCI and FIAS in the conduct of the study. Analyze and discuss from the stand-point of competition among the carriers. public barriers to entry in terms of policy regulations as well as private barriers to entry. Data sources Primary data was collected from Directorate General of Civil Aviation (DGCA) on passenger traffic.

As on January 2008. There was only a pre-entry scrutiny of applications to verify the financial soundness. Another major development in this sector in 1997-98 was that the government approved foreign equity up to 40% and NRI/OCB investment up to 100%. In the same year. It may be on scheduled or non-scheduled basis. maintenance. another low cost airlines also entered the market in 2006. In 1986.nic. low cost carriers like Go Air. Scheduled Air Transport Service . Since then. number of flight operators. Air Sahara. East-West Airlines. there are 14 scheduled and 70 non-scheduled operators in India1. Air Deccan was the first low cost carrier to enter the domestic aviation industry. Jet airways.means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series. or issue tickets to passengers. The operator is not permitted to publish time schedule and issue tickets to passengers. etc on a macro level.htm ____________________________________________________asci research and consultancy 4 . Indigo Airlines. the Air Corporation Act was repealed and the air transport sector in India was opened to private players subject to fulfillment of statutory requirements for operation of scheduled services. The Act prohibited any person. In 2005. the airline industry in India was nationalized. 1 Detailed information is available at http://dgca.Jet airways. With effect from 1st March 1994. Air India International and Indian Airlines Corporation were established and the assets of all the existing air companies were transferred to these two organizations. many other Low Cost Carriers have entered the market. In 1997. Kingfisher began operation. The Air Taxi Scheme was introduced in 1986 to boost tourism and augment domestic air services. to or across India. In accordance with this Act. The entry of low cost carriers changed the competitive landscape of the industry. With the incorporation of the Air Corporation Act on 28th May 1953. inter-alia that they could not publish time schedules.An air cargo service means air transportation of cargo and mail.in/operator/sch-ind. Non-Scheduled (air-taxi) Service. only 4 operators that started operations following the deregulation continued to operate. b. this section will look at the growth of the industry in terms of passengers. private airlines were allowed to operate charter and non-scheduled services under the Air Taxi Scheme which meant. Also. The history of evolution of the aviation industry in India will be traced from 1953 onwards. By 1997. each flight being open to use by members of the public. Jagson and Modiluft. Air Deccan commenced operations. Categories of Air Transport Services a. two air corporations viz. This in effect gave monopoly to Indian Airlines and Air India on air transport in India. Modiluft and NEPC Airlines. c.Air Taxi Operation means an air transport service other than scheduled air transport service and may be on charter basis and/or non-scheduled basis. The choice of the aircraft type and size was also left to the operator. security and safety aspects of operations and human resources development proposed to be undertaken by the applicant. several steps were taken to remove the barriers to entry and exit from the sector. Air Cargo Service. other than the corporations or their associates to operate any scheduled air transport services from. Passengers are not permitted to be on these operations.Competition Issues in the Air Transport Sector in India I. In August 2003. A host of private players commenced operations as air taxi operators including Air Sahara. Paramount and Spicejet also entered the market. Damania Airways.

The growth of domestic passengers carried by all scheduled operators is given in the following chart. For operation outside India. there is a continuous positive growth in the passenger. a new section of middle-class people are now availing the air transport system. which signifies that with the introduction of low cost airlines in the Indian aviation industry.20 million passengers during 2007-08. registering a growth of 27. Most of the airports have recorded a growth of over 30% YoY in 2005-06. except for the year 2001-02.Competition Issues in the Air Transport Sector in India These operations are to destinations within India. domestic airlines carried 25.1 : Growth Rate of Domestic Passenger carried by all scheduled operators (in percentage terms) 40 30 20 Growth Rate 10 0 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 -10 -20 Years Source: Various Air Transport Statistics published by Directorate General of Civil Aviation ____________________________________________________asci research and consultancy 5 . According to data released by DGCA. Growth of the Sector The Indian Aviation sector has shown an impressive growth post privatization and after the start of arrival of Low Cost Carriers from 2003. The passenger traffic maintained a CAGR of 19% from 2002-03 to 2006-07 in the domestic segment. Figure I. The aircraft traffic in the top tier cities in India has grown by 33% in 2005-06 and 14% in 2004-05.8%. the operator has to take specific permission of DGCA demonstrating his capacity for conducting such operation. The above definitions are as defined by the Ministry of Civil Aviation. It can be observed that in the post liberalisation period.

The factors leading to the rise in growth can be divided into demand side and supply side factors. Disposable income in India has grown five times in the last two decades and the expenditure on transportation as a share of household expenditure increased from 6% to 14%. ____________________________________________________asci research and consultancy 6 . The penetration levels of air services however has still been very low at 20 trips/annum/thousand passengers in 2005 as against 2300 trips/ per annum/thousand passengers in United States and 60 trips / per annum/ thousand passengers in China. b.marketresearch. internet auctions. One can analyse the Indian Aviation Sector by considering a PEST2 analysis. Supply Side Drivers Entry of Low Cost Carriers was a trigger point for the sector. social and technological analysis.html 2 PEST is an acronym for political. economic.com/map/prod/1482657. PEST Analysis Political Economic Social Technological • Liberalization of the • • • • Sector Excise Duty and Sales Tax on Aviation Turbine Fuel Modernization of Airports Interface form Other Agencies Entry of Low Cost Carriers • Contribution to Economy • Rising Fuel Costs • Investments in the Sector • Developments in Airport • • • • • • Cities Employment Opportunities Ensuring a Level Playing Field Safety Regulation Increase in disposable income Increase in business travel Increase in consumer spending • Growth of Electronic Ticketing • Satellite based Navigation Systems • Technical Cooperation with EU Source: www. Demand Side Drivers Increasing disposable income coupled with greater consumerism has led to an increase in the demand for air transport. special discounts and last day fares.Competition Issues in the Air Transport Sector in India Drivers to Growth The Indian Aviation Industry has witnessed tremendous growth in the past few years. a. Air travel ceased to be an elitist activity and created a whole new segment of air travelers. The sector for the first time saw multiple slab tariffs such as Apex fares.

Indian carriers have 480 aircraft on order for delivery by 2012. In April 2007 Indian merged with Air India and a new corporation called NACIL was formed. SpiceJet SpiceJet.Competition Issues in the Air Transport Sector in India The Centre for Asia Pacific Aviation (CAPA) predicts that domestic traffic will grow at 25 percent to 30 percent a year until 2010 and international traffic will grow by 15 percent. taking the overall market to more than 100 million passengers by the end of the decade. It was earlier known as Royal Airways. Major Players in Indian Aviation Industry The rapid growth of Indian economy has resulted in a spillover effect on the airline industry in India. a low cost airline. 2005 with a fleet of 4 Airbus A320 aircrafts. Again. The airline offers several unique services to its customers which has become its USP. Several new players have entered the industry and many more are expected to enter soon. SpiceJet has chosen a single aircraft type fleet that allows for greater efficiency in maintenance. Jet Airways Jet Airways was established on 3 May 1991 with a fleet of 4 Boeing 737-300 aircraft. Indian Airlines began its operation on 1st August 1953 and was entrusted with the responsibility of providing air transportation within the country as well as to the neighboring countries. Kingfisher Airlines Kingfisher Airlines started its operations on May 9. as well as by the fact that low fares have allowed passengers to fly more frequently. ____________________________________________________asci research and consultancy 7 . been an increase in both the width and depth of consumption. Jet Airways bought Air Sahara in April 2007. led primarily by the conversion of train and bus passengers to air travel. This has induced a phase of intense price competition with the incumbent full service carriers discounting up to 60-70% for certain routes to match the new entrants ticket prices. itself a reincarnation of Modiluft. and supports the low-cost structure. The chart below shows the entry and exit of airlines in India over the last decade. In a short span of time Kingfisher Airline has carved a niche for itself. Jet Airways was the first private airline of India to fly to international destinations. therefore. the growth in supply in the industry is overshadowed by the extremely strong demand growth. The following are major players in the domestic aviation sector: Indian Indian (previously known as Indian Airlines) is fully owned by the Government of India and came into being with the enactment of the Air Corporations Act 1953. with 24 daily flights serving 12 destinations. It is now a public limited company. began its operations in May 2005. It is a phase of rapid growth in the industry due to huge build-up of capacity in the LCC space. with capacity growing at approximately 45% annually. Kingfisher bought Air Deccan in May 2007. There has.

IndiGo Airline IndiGo entered the Domestic Aviation market in August 2006. a leading Indian textile manufacturer based in Madurai. It has revolutionized air travel in India. It presently has a fleet of 18 aircrafts and plans to expand its fleet and network in a phased manner. Air Deccan was established in 2003 and started operations in August that year. Go Air started its operations in 2005. It is a part of Deccan Aviation Private Limited. Paramount Airways Paramount Airways is a low cost private airline operating only in South India. India's largest private heli-charter company. It was launched on October 19.Competition Issues in the Air Transport Sector in India GoAir Airlines GoAir Airlines is a low cost airline promoted by Wadia Group. The headquarters of Paramount Airways is in Coimbatore ____________________________________________________asci research and consultancy 8 . 2005 by the Paramount Group. Air Deccan Air Deccan is India’s first low cost airline.

1: Entry and Exit of Different Airlines in India 1995 96 97 98 99 2000 01 02 03 04 05 06 Indian Jet Airways Air India Archna Airways Damania Airways East West Airlines Modiluft NEPC Alliance Air Air Sahara Air Deccan Kingfisher SpiceJet Go Air Paramount Indigo Source: Indian Civil Aviation Industry . 2007 by ASSOCHAM and Ernst & Young .Competition Issues in the Air Transport Sector in India Chart I. ____________________________________________________asci research and consultancy 9 .Road Map for Growth.

7% of the market at that time while Jetlite held 8.0 0. Interestingly.0 20. In fact.8%.4 percent in 2000-01 and 68.0 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Years Scheduled Public Airlines Scheduled Private Airlines Non-Scheduled Airlines Source: Calculated from various Air Transport Statistics published by Directorate General of Civil Aviation Share of Total Passenger Traffic of Various Airlines If we look at the market share in the overall passenger traffic of various airlines for the period October-December 2006. in 2007 three mergers happened in the Indian Air Transport Sector.2 : Share of Total Domestic Passenger Traffic Carried by All Scheduled and Non-Scheduled Operators of India (1993 – 94 to 2005 – 06) (in percentage terms) 80.0 10. we find that Jet held 27% of the market share followed by Air Deccan which held 19%. The market share of scheduled private airlines increased from 47. the aviation industry is no longer dominated by the government-owned airlines.Competition Issues in the Air Transport Sector in India Market Share of Scheduled and Non-Scheduled Players With the entrance of private airlines as well as low cost airlines in India. So if we look at the market shares post merger. Figure I.0 40. the oldest player in the industry also held 19%. As already stated.2 percent in 2005-06. ____________________________________________________asci research and consultancy 10 .0 60. Today Indian aviation industry is dominated by private airlines.0 Percentage 50. Kingfisher Airlines held only 9. including low cost carriers.0 70.0 30. one can observe the changing trend now. The following chart shows how the trend has changed over the last decade and a half. Indian. Jet Airways after the merger with Air Sahara now controls around 31% of the market and Kingfisher and Deccan together hold around 28%. The private scheduled airlines are dominating the market in terms of passengers carried.

Figure I.0 10.7 1.8 1.1 3.1 18.0 Air Deccan Spice Jet Paramount Airways Indigo Airlines Go Air Kingfisher Indian / Air India Others 9.8 Indigo Airlines 7.4 22.8 Air Deccan Spice Jet Paramount Airways 13.7 4.8 Source: Computed by the authors from DGCA and Quarterly Review of Traffic.2 0.4 14.1 7.3 : Share of Total Passenger Traffic of Various Airlines (Oct – Dec 2006) (in percentage terms) Jet Airways Jet Lite 0.1 8. Airports Authority of India ____________________________________________________asci research and consultancy 11 .9 27. Airports Authority of India Figure I.7 Go Air Kingfisher Indian / Air India Others Source: Computed by the authors from DGCA and Quarterly Review of Traffic.0 3.5 19.4: Share of Total Passenger Traffic of Various Airlines (Oct – Dec 2007) (in percentage terms) Jet Airways Jet Lite 17.9 8.Competition Issues in the Air Transport Sector in India Thus there has been considerable change in the market structures post merger.

The following table shows how the fleet size of all scheduled airlines in India has increased over the last ten years. 7. 3. Table I. the index as calculated above shows that postmerger further analysis is required. all the airlines have started to increase the fleet size also. It increased to 305 in 2006-07 from 247 in 2005-06. 1. 2. 8.Competition Issues in the Air Transport Sector in India Table I. The results are presented in the Table above.2 : Fleet Size of All Scheduled Airlines 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sl.1 : Calculation of HHI Market Share 2006 Square of Market Share Market Share 2007 Square of Market Share After merger 169 225 100 64 529 81 16 289 1 1474 784 100 961 81 16 289 1 2232 Kingfisher Airlines 10 100 13 Deccan 19 361 15 SpiceJet 7 49 10 Jetlite 9 81 8 Jet Airways 27 729 23 IndiGo 4 16 9 Go Air 4 16 4 Indian 19 361 17 Paramount 1 1 1 HHI 1714 Source: Computed by the authors from DGCA data. The index of concentration has been calculated for the entire passenger segment pre and post merger. Fleet Size of All Scheduled Airlines To cope with the rising number of air passengers. Since HHI is a prima facie indicator as to whether or not further analysis is warranted to gauge competition. 10. Name of the Airlines Air India + AI Express Indian Airlines Alliance Air Jet Airways Sahara / JetLite Air Deccan Paramount Spicejet Kingfisher Go Air IndiGo 26 55 9 - 28 52 3 13 4 - 26 39 12 19 6 - 26 44 12 25 8 - 26 44 12 28 9 - 28 42 11 30 7 118 29 44 11 38 10 132 31 43 11 41 12 138 35 47 15 41 20 4 162 37 52 15 42 22 16 184 42 55 15 53 29 29 1 5 11 3 4 247 46 73 62 28 41 5 9 27 7 7 305 Total 90 100 102 115 119 Source: Report of Aviation Centre of Excellence ____________________________________________________asci research and consultancy 12 . No. 5. 4. 6. 9. 11.

2005-06 of DGCA for the period 2005-06. 8. 3: Order for Airplanes Sl. The following table shows the amount of loss each airline has incurred. 6. Table I. ____________________________________________________asci research and consultancy 13 . 9. 1. The following figure shows the rapid fleet expansion by airlines. No. 5. 2. 7. Figure I. 3. of Flights IndiGo Go Air Kingfisher Spicejet Paramount Air Deccan Sahara / JetLite Jet Airways Alliance Air Indian Airlines 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Years 200 150 100 50 0 Air India + AI Express Source: Report of Aviation Centre of Excellence Also.Competition Issues in the Air Transport Sector in India There is more than three fold increase in the fleet size of all airplanes in India over the last ten years. all the private airlines except Jet Airways has incurred a net loss. the following table shows the order placed for airplanes by different airliners in 2007.5: Fleet Size of Operators in Indian Aviation Sector Fleet Size of Operators in Indian Aviation Sector 350 300 250 No. Name of the Airlines Order for Airplanes Air India + AI Express 68 Indian 43 Jet Airways 09 Air Deccan 90 Paramount 05 Spicejet 20 Kingfisher 50 Go Air 36 IndiGo 100 Total 452 Source: Report of Aviation Centre of Excellence Profit / Loss of Domestic Operators As per the Air Transport Statistics. 4.

a combination of factors such as high aviation turbine fuel (ATF) prices. rising labour costs and shortage of skilled labour.48 -2395.8 Source: Air Transport Statistics. No.5 -575.5 -194.5 -3405. and intense price competition among the airliners is responsible for the losses in this sector3.2 4520.htm ____________________________________________________asci research and consultancy 3 14 Ki G o Ai r . Figure I.9 10 Go Air -583. 2005-06 of DGCA According to the experts. 2005-06 of DGCA Turbulent Times for Airlines in India.4 -1380.4: Net Profit/Loss incurred by Different Airlines (in rupees) Net Profit / Loss Sl.6: Net Profit / Loss of Different Airlines in 2005-06 (in Rupees million) 5000 4000 3000 Profit / Loss 2000 1000 0 ne s nt Ai rI nd ia ra et an er ay s ou ic ej ha rD ec c ng fis h -1000 -2000 -3000 -4000 Ai rli irw Sa m Je tA an Pa ra Sp In di Ai Airlines Source: Computed by the authors from Air Transport Statistics.Competition Issues in the Air Transport Sector in India Table 1.icmrindia.0 57. rapid fleet expansion. Airlines (2005-06) (in million) 1 2 4 5 6 7 8 9 Air India Indian Airlines Jet Airways Sahara Air Deccan Paramount Spicejet Kingfisher 26.org/business%20Updates/micro%20casestudies/Business%20Strategy/MCBS0007. available at www. ICMR Case Studies.

space etc. analysis of whether there is evidence of domination in certain routes. As defined in Section 2(t) of the Competition Act 2002. The product in the context of the air transport sector is transit from one place to another. The Herfindahl index is a measure of the size of the firms in relation to the industry and is an indicator of the amount of competition among them. However for the time sensitive passenger. Decreases in the Herfindahl index generally indicate a loss of pricing power and an increase in competition. particularly in relation to mergers. Transit from one place to another can occur through direct as well as indirect flights. To provide an assessment of the degree of competition in the relevant market in terms of key features such as time slots.Competition Issues in the Air Transport Sector in India II. Keeping the above in mind. Of these . Mumbai. of amount of very small firms to a single monopolistic producer. Analysis of time slots available to airlines Factors governing allocation of time slots Slot arrangements between merged airlines Data Description:Monthly data for 30 city pairs for the year 2006-07 has been collected from the Directorate General of Civil Aviation. Chennai & Kolkata. whereas increases imply the opposite. . the assessment is made on the basis of the route between city pairs on particular dates for particular time slots for selected routes. ____________________________________________________asci research and consultancy 15 . Hyderabad. The study is expected to concentrate upon the concept of the relevant product and geographic market in the passenger segment of the air transport sector and also provide an assessment of the degree of competition in the relevant market in terms of key features such as time slots. etc. the city pairs chosen for analysis comprise of the following metros: Delhi. & III. The concept of the relevant market is fundamental to the issue of competition and its assessment in any sector. indirect routes may not be a substitute for direct routes. As such. Bangalore. Since the route or every combination of city pairs at a particular time on a particular day is taken as the relevant market in the sector under study. the relevant product market means a market comprising of all those products or services which are regarded as interchangeable or substitutable. Competition authorities often use a scale such as the following to assess the significance of the HHI. It is defined as the sum of the squares of the market shares of each individual firm. it can range from 0 to 10000 moving from a large no. space. the relevant market is defined as the route between city pairs at a particular time on a particular date. Also there will be preference for the time and date of travel. The methodology outlined by the Competition Assessment Framework (CAF) has been followed. Key questions for the assessment include the following: • Has there been much market entry in the past and how successful has it been? • Does a single airlines or a group of airlines account for a substantial part of the market? • Does the market structure suggest that the competition may be limited? The methodology involves the following: An assessment of the percentage of traffic in selected routes on specific dates and specific time slots Share of airlines in the above routes Computation of four firm concentration ratios On the basis of the above. To assess the degree of competition within a market. a standard measure which can be used is the Herfindahl index.

From these thirty pairs we chose Delhi-Mumbai. flights originating to and from a metro.1 below gives the Herfindahl Index of Concentration for these thirty city pairs. and there are no concerns about market concentration. ____________________________________________________asci research and consultancy 16 .Competition Issues in the Air Transport Sector in India (a) An HHI of less than 1000 is low. and might raise competition concerns. Delhi-Chennai and Bangalore to Chennai for further analysis. (b) An HHI between 1000 and 1800 is moderate. i.e. We analysed the monthly passenger data for thirty city pairs for the year 2006-07. The city pairs where the Herfindahl Index was over 1800 have been highlighted. As already stated. We chose Delhi-Mumbai because of the highest passenger traffic on this sector and the other two were chosen randomly based on data availability. metro city pairs were selected . Table II. (c) An HHI above 1800 is high. and competition concerns are not considered likely.

8 2662.7 2208.0 1981.4 1662.7 1672.1: City Pair-wise Herfindahl index of Pax.1 1814.5 2662.4 2646.9 2568.8 1720.5 1571.8 2224.5 2278.9 Source: Computed by the authors from the DGCA data ____________________________________________________asci research and consultancy 17 .0 2475.0 1877.6 1898. Carried in 2006-07 Sectors Concentration Delhi to Mumbai Mumbai to Delhi Delhi to Chennai Chennai to Delhi Delhi to Kolkata Kolkata to Delhi Delhi to Hyderabad Hyderabad to Delhi Delhi to Bangalore Bangalore to Delhi Mumbai to Hyderabad Hyderabad to Mumbai Mumbai to Bangalore Bangalore to Mumbai Mumbai to Chennai Chennai to Mumbai Mumbai to Kolkata Kolkata to Mumbai Chennai to Bangalore Bangalore to Chennai Chennai to Hyderabad Hyderabad to Chennai Chennai to Kolkata Kolkata to Chennai Kolkata to Bangalore Bangalore to Kolkata Kolkata to Hyderabad Hyderabad to Kolkata Hyderabad to Bangalore 1591.3 Bangalore to Hyderabad 1640.6 2577.1 1536.5 1506.0 1569.9 2645.5 1663.8 2371.4 2618.6 1595.5 1604.Competition Issues in the Air Transport Sector in India Table II.3 2379.8 2224.

Mumbai Period: 2006-07 Source: Computed by the authors from the DGCA data In 2006-07. the HHI becomes 2681. in the Delhi-Mumbai route. Kingfisher and Deccan and Jet and Sahara. ranges between 1500 to 1600. this time is calculated based on when the aircraft arrives at or leaves the gate. Slot Policy* The ICAO defines an airport slot as the time at which an aircraft is expected to arrive at or depart from a capacity constrained airport.7%) If we look at the index of concentration. The capacity of an airport is defined as the minimum of parameters such as terminal capacity. Therefore. we could not compute the HHI after the mergers. It is seen that now with the mergers of Air India and Indian. For commercial operations which use airport gates. had not been completed. This does raise concern regarding competition in this route. the mergers between Kingfisher & Deccan & Indian & Air India had not materialized. just as an exercise we tried to see what would happen if given this scenario the mergers had actually happened. while on table. it may be noted that in 2006-07. an HHI between 1000 and 1800 is considered moderate and competition concerns are not likely. To take into account variations in flight times. baggage belts etc. While terminal capacity is expressed in terms of a maximum hourly throughput of * Information on slot policy received from DGCA in January 2009. Jet Airways had the largest market share (26%) followed by Indian (20%)and Kingfisher (12. Due to unavailability of data. HHI for the Delhi-Mumbai route for the year 2006-07 ranged between 1500 and 1600.3. According to the Competition Assessment Framework. However. unavoidable delays etc.Competition Issues in the Air Transport Sector in India Figure II.1: Route 1: Delhi.Sahara deal. while the monthly HHI for this sector. airport slots may actually be allotted in terms of a time period such as 1645-1700. ____________________________________________________asci research and consultancy 18 . Also the Jet . runway. The monthly passenger data indicate a fair stability of market shares of airlines on a monthly basis. The number of slots that can be allotted by an airport would depend upon its capacity.

Who allots slots ? For airports managed by the Airports Authority of India (AAI). BIAL. For the defence airports as the terminals are managed by AAI and the runway is managed by the Ministry of Defence. For AAI airports All domestic airlines who wish to operate at an airport file the landing or take off slots with DGCA. apron and terminal building. Air Force airfields: Indian Air Force. the same is also analysed on the basis of principle of airport capacity. the request for slots for such airports are filed with both agencies. Slot Allocation Policy Slots are allocated twice in a year. Based on the above analysis all airport operators either approve the slots in respect of the airports or generate a list of alternate offers. at the first level an attempt is made to resolve the dispute at the level of the airport operator and the slot allocation committee. These approved and offered slots are discussed in a meeting where all the airlines. AAI is the nodal agency for slot allocation and will advise the JVC on runway capacity for slot allocation. JVCs will allocate the slots in consultation with AAI since the ATC/CNS services will continue to be provided by AAI. Hyderabad: Hyderabad International Airport Limited (HIAL) in coordination with AAI. the slots are allocated by them as per the details given below: IGI Airport: Delhi International Airport Limited (DIAL). Later if an airlines files a request for amendment or an additional slot. For Airports managed by JVCs Airlines will submit their requests for slots to JVCs at the beginning of the summer and winter season as per IATA guidelines. The slot requests are analysed vis a vis airport capacity parameters namely runway. For the purpose of scheduled flight operations. After this meeting. in coordination with AAI. DIAL. BCAS and various airport operators are present. Navy. runway capacity is defined as the number of air traffic movements (landings or take offs) which can take place during a given period. Each concerned airport operator analyses these requests and either approves or discusses the alternate offered slots with the airline and later communicates the approved slots to the concerned airline and DGCA. private and defence airports. in coordination with AAI. The additional slot can be presumably a new slot that is available because of expansion of existing airports or opening of new airports or unused capacity available at airports. the approved slots are conveyed to DGCA for approval of the flight schedule. Air Force. The minimum of these parameters is used to define the number of slots that can be allotted. HAL. Naval Airports: Indian Navy. Cochin : Cochin International Airport Limited. slots are filed for the summer season and winter season. For JVCs. If the dispute remains unresolved. where each season is for a period of six months. the AAI allocates the slots. The request and schedule will also be submitted to AAI. DGCA. it is addressed at the level of Member (Operations). Bangalore : Bangalore International Airport Limited (BIAL) in coordination with AAI. Cochin International Airport Limited for the airports managed by these agencies and the Bureau of Civil Aviation Authority. the respective airport operator namely AAI. CSI Airport: Mumbai International Airport Limited (MIAL). MIAL.Competition Issues in the Air Transport Sector in India arriving and departing passengers. The JVC will thereafter analyse the requests of the airlines with reference to runway capacity ____________________________________________________asci research and consultancy 19 . If there is a dispute between an airline and the airport operator.

the JVCs will approve the slots. Allotting slots to new entrants As per the slot allocation policy. • The process of Mergers and Acquisitions has helped new entrants to gain control of slots. There is an ‘use it or lose it’ rule according to which. If the concerned infrastructure is not used. The JVC will convey the slot approval to the AAI who in turn will convey it to DGCA for approval of schedules. This policy usually accounts for allocation of a large majority of slots. ____________________________________________________asci research and consultancy 20 . revert to the same carrier. • By additional slots being made available through the opening of new airports. As stated earlier. as pointed out by the comments made by FIAS/DFID (italics comments added) namely: • By being allocated slots at airports which had unused capacity available-this can be true especially of the non metro airports. This had also happened in the Cochin airport. of the latter. the airlines that is merging with /acquiring another airlines is allowed to take control of the airport infrastructure. including the slots. when a merger happens. slots are allocated twice in the year. This has happened in Hyderabad and Bangalore airports. The process of grandfathering of slots. the above right will be available with the airlines that takes over till such time as the infrastructure /rights are under use. In the context of mergers. particularly at peak times. The question especially arises because presumably. The same procedure is also followed for amendment of schedules. This is discussed in pages 62 . JVCs will coordinate with the AAI for approval or offer from runway capacity perspective. In case the slot is not available due to runway capacity constraint and is available from terminal and apron capacity perspective. A question therefore arises as to how the new airlines have been able to collectively gain control of a majority of the slots in a relatively short period of time. The offer/approval will be given by JVCs to the airlines after getting clearance from AAI from the runway capacity perspective. If the request of the airlines is within the capacity parameters. the airlines will lose the user rights over the infrastructure including the slots. the national airlines has control of the majority of slots. a key asset that an airline can hold is the ‘slot’. It may be noted here that allocation of slots is subjected to the following two conditions: • • Grandfather rights. it is clear that for this sector. The new entrants can gain control of the slots in each of the following ways. • By additional slots being made available through the expansion of existing airports. which basically means that preexisting ownership of slots by the incumbent airlines continue to be retained is a major barrier to entry for the new airlines. after allocation of slots on the basis of ‘grandfathering’ of slots. especially in slot constrained airports. From the above. which means that slots allocated to a particular carrier in the previous season and which were used to a significant extent. post privatization. This is happening for instance in the Delhi and Mumbai airports where expansion is happening and additional capacity is being made available. Charges for peak and non peak time slots There are no charges for peak and non peak slots in the policy. This is because the peak slots in existing airports will already be taken. according to the Domestic Air Transport Policy. 50% of the left over slots may be allotted to the new airlines. especially the peak slots through the grandfathering process.66 of the Report.Competition Issues in the Air Transport Sector in India as advised by AAI and terminal and apron capacity as decided by the concerned JVC.

Go Air holds the maximum slots and Deccan the least. Indigo. A priori.22.00.59 21.00. there is a total number of 15 flights available. high costs. it is interesting to note that Jet and Kingfisher hold the maximum slots (12 each) followed by Indian (11).00. in 2008 during the peak times – 0600hrs to 0800 hrs and 1600 to 1800 hrs.59 10. The national carrier is not competitive as a result of its own problems such as low labour productivity. Spice Jet and Go Air have one slot each. In accordance with the slot allocation policy. Kingfisher owns 6 slots.3 it is clear that the peak time for this sector is 0600hrs to 0800 hrs and 1600 to 1800 hrs.0011.59 15.59 19.005. of the slots that are available in the airports. Among the low cost carriers.59 4. Of these.2 and II. there are certain low cost carriers that hold slots.59 17. Even during this peak time. In 2008.16.18.14.20. Jet has 4 slots and Indian has two slots while Jet lite has one slot. From figures II. This poses a major barrier to the new entrants especially in slot constrained airports.009. Interestingly. both Jet and Indian have 5 flights each. Indian and Air India hold 11 slots. Figure II.59 6.59 23. Jet airways holds the maximum slots (15).00. privileges offered to consumers etc. revert to the same carrier. 50% of the left over slots are allocated to the new entrants.007.59 8.003. In the DelhiMumbai route in July 2006 there are 61 fights in a day.00. of the total 19 flights during the peak hours. It is clear that Jet and Kingfisher have a major share of slots at the peak hours on this lucrative route. there is a process of grandfathering of slots which means that the slots allocated to a particular carrier in the previous season and which were used to a significant extent.00. Of these Kingfisher has 5 slots.12.2: New Delhi to Mumbai (July 2006) 12 Air India 10 Number of Flights 8 6 4 2 0 2. slots give an airline an advantage and hence helps it to capture the market. Another thing to note here is that Kingfisher has gained peak time slots while Indian has lost on the peak time slots on this lucrative route. The incumbent players are thus able to corner the peak time slots and this gives them an advantage over the new entrants into the industry.59 13. Note that in July 2006 there are 10 flights during 0600-0800 hrs and 9 flights in the evening during 1600-1800hrs. which may be due to the above mentioned factors or due to some airlines losing their right to slots on the ‘use it or lose it’ basis and after taking care of the grandfathering rights. to the existing airlines. In 2006. Among the low cost carriers Jet Lite and Deccan have 6 and 5 slots respectively. Indian has obviously lost out to the private players with only two slots in the peak period.Competition Issues in the Air Transport Sector in India Thus. The remaining slots that are available are allotted by the process as described above in accordance with the slot allocation policy.59 Time Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Source: Computed by the authors from the DGCA data ____________________________________________________asci research and consultancy 21 . in accordance with the slot allocation policy.

6 69.3 NA 61.2 63. The flights with the lowest and the highest PLFs for the month have been highlighted in red.7 65.7 85.4 NA 75.1 86 66.1 67.00-11. the PLF is lowest for the flight at 1300hrs.3 76.5 60.00-19.59 18.06.2 73.9 79.7 75.7 87. The same has been tabulated below.6 65. of Seats 145 124 145 145 145 124 145 145 145 145 JULY AUG SEP OCT NOV DEC JAN FEB MAR 73.0 75 72 75 67 94 59 91 99 NA 86 80.2 78.2 ____________________________________________________asci research and consultancy 22 .7 63.7 87.5 73.59 8.8 75 NA 69.3 89.4 90 83 NA 78. for all other airlines except Indian the data available was aggregative and not flightwise.59 12.00-7.6 76.1 85.9 67.5 70.3 73.2 below gives the PLFs for Indian for the period July 2006-March 2007.3 64 55 81.6 60 68.59 10.8 69.59 6.Monday) 8 7 No.59 16.9 72.00-5.9 72.59 14. We could not calculate the passenger load factor for all other airlines due to unavailability of data. We therefore calculated the passenger load factor of Indian. As was mentioned earlier.Competition Issues in the Air Transport Sector in India Figure II. However.1 49.00-9.6 79.6 63.4 56. Table II. we collected the data from DGCA on the number of passengers in 2006-07.00-21.5 NA 69.4 59. while for the non-peak times.2: Passenger Load Factor for Indian Type of Aircraft IC165 0800 hrs A320 IC657 0600 hrs A319 IC688 0700 hrs A320 IC167 0900 hrs A320 IC865 1000 hrs A320 IC887 1300 hrs A319 IC863 1700 hrs A320 IC810 1800 hrs A320 IC805 1900 hrs A320 IC602 2000 hrs A320 Average PLF for month Flt.9 71.3 59.00-3.3 65.5 75.9 73.7 58.5 86.7 66.6 79.2008 .59 4.2 82.9 77.6 68.8 77.7 76.9 NA NA 61. Time No. No.00-13.59 20. The PLF was highest for the month of March 2007 and lowest for January 2007. This will further strengthen and prove our hypothesis that peak slots give an advantage to the air carrier.6 72.59 22.00-23.1 70.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Source: Computed by the authors from the DGCA data Finally.6 80. Table II.3 74. we now analyse the passenger load factors at the peak times.7 75.3: New Delhi to Mumbai (July 2008) New Delhi to Mumbai (02.3 61.00-17.5 NA 31 60. As can be seen from the table. generally ranging from 70-80 percent. of Flights 6 5 4 3 2 1 0 2. Indian however.6 75.7 81. The average PLF for the month are given in the last row. provides the data flight-wise. having looked at the peak time slots.6 82.3 71. the peak times of 0600-0800 hrs and 1600-1800hrs have a higher PLF.6 65.1 81.00-15.2 60.2 90.6 NA 62.5 81.

when a merger happens. Indian and Deccan hold 79% of the total market share and hence the index of concentration in this sector is 2224. the airline loses the slots. Again if we try to see what happens if we assume mergers in this scenario.Period: 2006-07 Source: Computed by the authors from the DGCA data The market shares in this sector are more concentrated as can be seen from the diagram above. this raises competition issues. As we can see above from the slots.5. We consider only substitutability within airlines given the consumers choice to fly. Jet. Three major players. in particular in relation to their pricing decisions. If the rights are not used. According to the CAF. It is seen that after the mergers in fact the index becomes even more concentrated at 2742. A firm or a group of firms cannot have a significant impact on the prevailing conditions of sale.Competition Issues in the Air Transport Sector in India From an economic point of view. the slots are transferred to the airline which takes over the aircraft till such time as the infrastructure/rights are under use. Slots analysis According to the Domestic Air Transport Policy. demand substitution constitutes the most immediate and effective disciplinary force on the suppliers of a given product. Basically. such as prices.4 : Route2: Delhi-Chennai . if its customers are in a position to switch easily to available substitute products or to suppliers located elsewhere. For our analysis we assume that the demand for air travel is not substitutable with other modes of transport like road or rail. the exercise of market definition consists in identifying the effective alternative sources of supply for the customers of the undertakings involved. both in terms of products/services and geographic location of suppliers. ____________________________________________________asci research and consultancy 23 . Jet and Kingfisher control the slots on the market. for the definition of the relevant market. Figure II. while there are a number of airlines flying on this route.4.

5 1 0.Competition Issues in the Air Transport Sector in India Figure II.1000. of Flights 3 2.1400.5 No.0800.0600.Chennai (July 2006) 3.5 0 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots Source: Computed by the authors from the DGCA data ____________________________________________________asci research and consultancy 24 .6 : New Delhi to Chennai New Delhi to Chennai (02.22000600 0800 1000 1200 1400 1600 1800 2000 2200 2400 Time Source: Computed by the authors from the DGCA data ALLIANCE AIR SPICE JET JET LITE GO AIR AIR DECCAN JET AIRWAYS INDIAN Figure II.5 0 0000.1200.06.5 : New Delhi to Chennai Delhi.2000.1800.5 2 1.2008 .Monday) 3.5 2 1.1600.5 1 0.5 3 Number of Flights 2.

9 74. Indigo and Kingfisher 2 each and Jet Lite has 1 slot.9 Air Sahara Air Deccan Spice Jet Paramount Airw ays 3. Table II.1 82. in 2008 Deccan has no flight on this sector.4 Air India Source: Computed by the authors from the DGCA data ____________________________________________________asci research and consultancy 25 .7 56 65. Spice Jet. Of these.3 OCT 66. IC439 0640 hrs IC429 1015 hrs IC540 2000 hrs IC801 Type of Aircraft 3191c A320 A320 A320 No. It may be also noted that while in 2006-07. Figure II.1 7. As seen in the above figure.4 72. As already mentioned.Competition Issues in the Air Transport Sector in India In July 2006. Jet and Jet Lite have the maximum (4) slots each.5 73.5 FEB 71.5 64.5 Table II.5 JAN 52. of which Jet has three slots. of the 15 flights operating on this route 33% of the slots are controlled by Jet. Kingfisher has one slot and Indian has three slots.5 77.6 MAR 73.1 63. 1600 to 1800hrs and 2000 to 2200 hrs.3 NA AUG 57.4 80.7 6. As can be seen above.9 15. Kingfisher does not have a flight on this sector in 2006. these three large players control the major share of slots.7 56.2 NA 69. therefore. However. the peak time flights have the highest PLFs. of Seats 144 145 145 145 JULY 72.7 : Route 3 Bangalore to Chennai Passengers Travelled from Bangalore to Chennai during 2006-07 0.8 73.6 76.8 70. So once again.3 above gives the PLFs for Indian for the month of July 2006.3 63 70. In keeping with the domestic Air transport Policy.5 60.7 SEP 82. if we look at the slots allocation in 2008. the peak time for this sector seems to be 0600 to 0800 hrs.4 DEC 71. Indian and Jet have 4 slots each.5 78.1 59. Spice jet and Indigo have one slot each. In 2006 and 2008 there are nine flights available during peak times. there were 18 flights operating on this sector.1 8. due to data unavailability we could not calculate the passenger load factors of the private airlines.3: Passenger Load Factor for Indian Flight Time No.4 56.6 80.1 NOV 68.6 64.4 Kingfisher Indian Jet Airw ays 42. post merger.2 79. It is therefore safe to assume that the merger of Kingfisher & Deccan gave Kingfisher the 2 slots in this sector.6 15. what we find is that of the 15 flights currently operating on this sector.9 64. Deccan had 23% of the market share.

interestingly. it is seen that 42% of the market share was held by Jet.When we analysed the monthly trends. During the peak hours of 0600 to 0800 in the morning. Jet has one slot. notice that even though Indian is an incumbent player in this market. and Kingfisher has two. The above two sectors demonstrated that peak times the PLfs were higher. Of Flights 5 4 3 2 1 0 ____________________________________________________asci research and consultancy -0 06 60 00 0 -0 08 80 00 0 -1 10 00 00 0 -1 12 20 00 0 -1 14 40 00 0 -1 16 60 00 0 -1 18 80 00 0 -2 20 00 00 0 -2 22 20 00 0 -2 40 0 00 00 ALLIANCE AIR SPICE JET JET LITE AIR INDIA AIR DECCAN KINGFISHER JET AIRWAYS Time Source: Computed by the authors from the DGCA data 26 . as the year progressed. Air Sahara held 7. however. The HHI for this sector for the year 2006-07 is 2475. it is interesting to note that the HHI at the beginning of the year (Apr-Jun 2006) was higher and starts falling from July 2006. However. In 2008. Air India which had a peak time slot 0600-0800 hrs in 2006 however does not have a slot in 2008. of the three flights. Paramount held 6. Figure II. Therefore it is questionable as to why the national carrier would give up its peak time slot. Kingfisher and Deccan each had about 15% of the market while Indian. it has not been able to capitalize on this and the share in the total was very small.4% of the market. Indian does not have a flight on this segment. some very interesting facts seem to emerge. Also. there are four flights in 2006 but only three in 2008. indicating the dominance of the two private players on this route as well.Competition Issues in the Air Transport Sector in India If we examine the market share for the entire year 2006-07 for this sector.8 : Bangalore to Chennai Bangalore-Chennai (2006) 6 No. At the beginning of the year more than 50% of the market was held by Jet. Jet’s dominance in this sector seems to decline while newer entrants like Paramount gained the market share. has only around 9% of the market.9% and Spice Jet held 3.7%.

5 1 0.5 2 1.9 : Bangalore to Chennai Bangalore to Chennai (02. in India. for this sector one of the key assets that an airline can hold is the ‘slot’.5 No. We pick Delhi-Mumbai route since it is one of the most lucrative routes and also the most competitive. The airline therefore had a lead time of a number of years before any of the private players entered. We try to look at Indian’s performance on this route and later generalize about reasons for non-performance. IA should therefore have all peak slots and should have established a loyal consumer base through frequent flyer programmes etc. It was only in 1994 that the Air Corporation Act was repealed and the air transport sector in India was opened to private players subject to fulfillment of statutory requirements for operation of scheduled services. ____________________________________________________asci research and consultancy 27 . it dipped from almost 66 per cent in 1997-98 to close to 38 per cent at the end of 2004. However. This thus merits explanation. As was analysed in the report. For e. This is a major barrier to entry to the new airlines especially in slot constrained airports since the peak slots will already be taken. Table—below gives the total slots available for the Delhi-Mumbai route in 2006 and 2008. As we noted in the report. Also. and to around 18 percent in 2008.2008 . Indian does have slots at the peak times for all metros.Monday) 3. there is a grandfathering of slots. what is notable is the fact that the number of slots with Indian at peak times are lesser than those with private carriers like Kingfisher and Jet Airways. If we look at the Indian airline's market share.Competition Issues in the Air Transport Sector in India Figure II.06. The national carrier was the only airline in the country with scheduled operations from 1953-1994. of Flights 3 2.5 0 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Time Slots Kingfisher Airlines Source: Computed by the authors from the DGCA data Why is Indian losing out? In this section we try to analyse why Indian Airlines (now Air India) is consistently losing market share. However. which basically means that preexisting ownership of slots by the incumbent airlines continue to be retained.g. what we find is that the entry of private players has led to a huge erosion of the market share for IA.

Table II. Jet and Kingfisher have a younger fleet with average age of fleet 4. It was only in 2007 that Indian acquired new aircrafts.4: Slots on Delhi-Mumbai Route No. ____________________________________________________asci research and consultancy 28 . The process of acquisition of newer aircrafts was initiated in 2005 after several years.php?file=rechoper Another important factor that needs to be noted is the fact that the fleet size of Indian has remained more or less constant over the ten year period 1996-2006.3years and 1.7 years 7.4 below gives the average age of fleet of the various domestic operators. Notice that the average age of fleet for the national carrier is 22 years for A300s and 13 years for A320s.8 years respectively.1 years 10.4 year Source: http://www.5 years 17.airfleets. Table II.3 years 1 year 3. Even then the expansion of fleet of the private airlines is much faster than Indian. of peak Total Total peak time time slots Slots Slots slots owned in Owned in Owned in owned in 2008 2008 2006 2006 11 15 6 5 11 2 6 4 -1 61 10 12 12 2 3 7 4 5 3 0 58 3 4 2 1 3 0 2 1 -0 16 2 3 3 1 1 0 1 2 2 0 15 AIRLINES INDIAN JET AIRWAYS KINGFISHER AIR DECCAN AIR INDIA GO AIR JET LITE SPICE JET INDIGO ALLIANCE AIR Total Discussions with experts in the field suggested that a major reason why despite having peak time slots the airline is losing out is the fact that the average age of the aircrafts for Indian is much higher than the industrial average.8 years 4. In sharp contrast.3 years 1. of No.Competition Issues in the Air Transport Sector in India Table II.net/ageflotte/index. Also the process of placing orders for newer aircrafts is much slower.5: Average Age of Fleet DOMESTIC INDIAN AIRLINES INDIAN JET AIRWAYS KINGFISHER AIR DECCAN AIR INDIA GO AIR JET LITE(PREVIOUSLY KNOWN AS AIR SAHARA) INDIGO PARAMOUNT AVERAGE FLEET AGE 22 years for A300s 13 years for A320s 4.

104 of them commanders -. The airline saw 166 pilots leave -.in less than two years. 5. While the private players were able to assess and take advantage of the market demand. 6. For example. Name of No. one of the worst policies was the grounding in 1990 of Indian Airlines' entire Airbus A-320 fleet for 9 months. Another reason that various experts identified as a major cause for loss of market share was the fact that some of the policies followed by the Government were actually detrimental to the growth of Indian Airlines. For example. The exodus virtually grounded the IA fleet with average utilization of its aircraft plummeting from 2. 10. it can be said that the public sector carriers have also faced ‘barriers to entry’. Since barriers to expansion can also be treated as barriers to entry. Indian was dependent on various authorities like Government/ Planning Commission etc for its expansion. The fleet acquisition plans of Air India and Indian Airlines take longer due to geopolitical and other considerations not connected with the airline business. the amenities provided by Indian airlines are lesser than its competitors. That combined with the advent of private airlines in Indian airspace in 1992 created serious problems for Indian Airlines (IA). both Jet and Kingfisher Airlines.6: Fleet Size of All Scheduled Airlines 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Sl. Air India + AI 26 28 26 26 26 28 Express Indian Airlines 55 52 39 44 44 42 Alliance Air 3 12 12 12 11 Jet Airways 9 13 19 25 28 30 Sahara / 4 6 8 9 7 JetLite Air Deccan Paramount Spicejet Kingfisher Go Air IndiGo Total 90 100 102 115 119 118 Source: Report of Aviation Centre of Excellence 29 44 11 38 10 132 31 43 11 41 12 138 35 47 15 41 20 4 162 37 52 15 42 22 16 184 42 55 15 53 29 29 1 5 11 3 4 247 46 73 62 28 41 5 9 27 7 7 305 Overall experts seemed to agree that the very characteristic of Indian airlines being a public sector has led to its decline. This slowed and delayed the process and gradually led to decline of market shares. 9. ____________________________________________________asci research and consultancy 29 . 3. 4. These barriers to expansion have affected their ability to expand their capacity and have thus affected their performance. 7. offer each passenger a personalized screen and headphones broadcasting video and audio channels.700 hours per aircraft in a year to about 2. 11. Also.000 hours. the Airlines 1.Competition Issues in the Air Transport Sector in India There is also a feeling in some sections that the airline personnel will also have to undergo some retraining to keep pace with the market dynamics. It may thus be noted that the public carriers have also faced major barriers to expansion due to a range of different government polices. 2. The fleet of 12 Boeing 737s was the worst hit. Table II. 8.

1: Descriptive Statistics for Price Data: Delhi . Access to slots provides an instance of such vertical fore closure by creating a barrier to entry. i. We discuss the horizontal and vertical issues with respect to the Competition Act 2002 as below: Price Discrimination A dominant firm may indulge in price discrimination by charging different prices to different consumers. Vertical issues can also have an impact on horizontal competition. do overpricing in certain routes by taking advantage of the dominant position etc. a few airlines have been able to corner the ‘peak’ slots. Thus.Mumbai Flights Timings Mean Median Mode Range Minimum Maximum 1 Kingfisher 2 Jet Airways 3 Kingfisher 4 Jet Airways 5 Jet Airways 6 Kingfisher 7 Jet Airways 8 Kingfisher 9 Jet Airways 10 Kingfisher 11 Jet Airways 12 Kingfisher 6:20 6:50 7:15 7:30 8:00 8:30 9:40 10:05 11:20 11:55 12:55 14:00 6285.6 6047 6017 6047 6550 6550 6047 6047 5217 6047 5217 4563 4563 4563 4563 4563 578 578 905 75 830 578 729 75 75 75 75 75 5972 5972 5142 5972 5217 5972 4488 4488 4488 4488 4488 4488 6550 6550 6047 6047 6047 6550 5217 4563 4563 4563 4563 4563 5574. the ability of competitors to offer similar services may be precluded if there is vertical fore closure.2 6475 6452. between airlines. Table IV.Competition Issues in the Air Transport Sector in India IV.3 5217 6050. A merger may also result in removal of a vigorous competitor from the market.9 6550 5795. by virtue of ‘grandfathering’ of slots. while vertical issues have effects between firms at different points in the same value chain.e.5 6047 4969 4533 4533 4533 4533 4533 5217 4563 4563 4563 4563 4563 ____________________________________________________asci research and consultancy 30 . thereby preventing competitors to enter the market. The study is expected to provide an assessment of the significant anti competitive practices in the air transport sector on the lines of India’s Competition Act 2002 Factors that limit competition on markets may be horizontal or vertical. Thus for example. Horizontal issues have effects on competitors. All three types of agreements discussed in the Competition Act 2002 can involve horizontal as well as vertical effects. A cartel may make an agreement to fix prices while a combination like a merger with a large market share may indulge in collusion to control price along busy routes by virtue of control over time slots.

it is already established that Jet has a major share of the market (26%) and Kingfisher has a substantial share (13%). Similarly for the 2230 flight. the minimum and maximum price of flights. with time slots that are close to each other. Of these Jet and kingfisher hold the maximum number of slots (11 each). however an exercise on the post merger scenario shows that HHI would be around 2681. the maximum price. Data was also collected on the taxes & surcharges charged by various airlines on the Delhi Mumbai route.6 6047 5919. the HHI ranges between 1500 and 1600 in 2006/07(pre merger). we assess specific routes. on this route.8 6047 4533 4563 4663. An analysis of prices along this route indicates the following (see Table IV. For example notice that both Kingfisher and Jet have a flight from Delhi to Mumbai at 1400 hours and for this price. It is noticed that there is a high degree of price parallelism in the Jet and Kingfisher flights that operate in the morning and evening peak hours.2 4563 5819.1 5972 5752 6017 6084 6047 6047 6047 6858. Also of the 8 flights during the peak hours.7 7079 6767. In terms of number of slots. For the Delhi-Mumbai route. A random day of the week was selected for this exercise. are the same.Competition Issues in the Air Transport Sector in India 13 Jet Airways 14 Kingfisher 15 Jet Airways 16 Kingfisher 17 Jet Airways 18 Kingfisher 19 Kingfisher 20 Jet Airways 21 Jet Airways 22 Kingfisher 23 Jet Airways 24 Kingfisher 14:00 16:00 16:50 16:55 17:25 17:45 19:15 19:40 20:30 21:00 22:30 22:30 4533 4563 4563 4563 6047 6047 6047 6047 6550 7079 6047 6047 4563 4563 75 1987 1484 1559 75 503 1409 3421 6279 1862 75 654 4488 4488 4563 4488 5972 5972 6550 5972 5972 5142 4488 4488 4563 6475 6047 6047 6047 6475 7959 9393 12251 7004 4563 5142 4796.3 which may raise competition concerns. It may be mentioned here that data indicates that a similar degree of price parallelism is seen between Deccan and Jetlite also. there are 55 flights a day on this route. As regards the extent of concentration.9 6550 6959. Thus Jet and Kingfisher are certainly dominant players in this sector in terms of market share as well number of slots.1 above): Data for the price of an air ticket in the Delhi –Mumbai route was collected 15 days prior to date of departure.8 4563 Source: Computed by the authors from the internet data In order to examine whether there is evidence of price discrimination in the sector. Minimum price. range as well as mean and mode are exactly the same. Jet and Kingfisher hold two each. the descriptive statistics are very similar. In fact as table IV. The break up is shown below: ____________________________________________________asci research and consultancy 31 . It may also be noticed that for most of the Kingfisher and Jet flights.1 shows. the closer the time of departure of the Jet and Kingfisher flights the greater is the price parallelism.

Competition Issues in the Air Transport Sector in India

As per the data collected all airlines charge a fuel surcharge of Rs.2700. In the Delhi-Mumbai sector, a passenger service fee of Rs. 225 is charged by all airlines. In addition, Jet and Kingfisher charge an Air Traffic Congestion Fees of Rs. 150. In the Mumbai Delhi sector the passenger service fee is Rs 233 while the Fuel Surcharge and Air Traffic Congestion Fees remain the same. Notice also that apart from the above taxes and surcharges, Jet and Kingfisher charge Rs. 150 as Air Traffic Congestion Fees and Go Air an extra Rs. 50 for services. The data is shown in detail in the table below. Through ransom analysis of the data on price fares for other sectors we were also able to conclude that while Fuel Surcharge is common across routes and constant at Rs 2700, the passenger service fees differs across routes. It is also interesting to note that Air Traffic Congestion Fee is charged by Jet and Kingfisher on the entire network and not only at peak times. This they argue is because the airlines suffer losses due to extra fuel consumed when the flight has to circle in the sky before it gets permission to land.

Table IV.2: Taxes and Surcharges on Route : Delhi – Mumbai Name of Airline Fuel Surcharge (in Rupees) (December 2008) Air Traffic Passenger Service Congestion Fees Fees (in Rupees) (in Rupees)
150 150 50

Indian Airlines 2,700 225 Jet Airways 2,700 225 Jet Lite 2,700 225 Indigo 2,700 225 Kingfisher Red 2,700 225 Kingfisher Class 2,700 225 Spice Jet 2,700 225 Go Air 2,700 225 Source: Compiled by authors from the websites of various airlines

Table IV.3: Taxes and Surcharges on Route : Mumbai – Delhi Name of Airline Fuel Surcharge (in Rupees) Passenger Service Fees (in Rupees) (December 2008) Air Traffic Congestion Fees (in Rupees)
150 150 50

Indian Airlines 2,700 233 Jet Airways 2,700 233 Jet Lite 2,700 233 Indigo 2,700 233 Kingfisher Red 2,700 233 Kingfisher Class 2,700 233 Spice Jet 2,700 233 Go Air 2,700 233 Source: Compiled by authors from the websites of various airlines

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Competition Issues in the Air Transport Sector in India

The dominant market shares of Jet and Kingfisher in terms of market share as well as share of slots alongside with price parallelism may indicate a tendency for price collusion. At a later stage, this may lead to overpricing, given the tendency of enhanced concentration on this market. To analyse the issue of anti competitiveness in the context of mergers, we refer to data relating to the Delhi –Chennai sector. In 2006/07. Kingfisher was not on the market while Deccan had a 22.6% share of the market (see Figure II.3). In 2008, post merger of Kingfisher and Deccan, Deccan has no flights on this sector while Kingfisher now has two flights (see figure-II.3). Thus as a result of the merger, a vigorous competitor, namely Deccan, was removed from the market and the time slots have been obviously taken over by Kingfisher. This may be safely assumed to have implications for price especially since Deccan is a low cost carrier and Kingfisher is a full cost carrier. In 2007, three major mergers took place in the domestic air transport sector, namely KingfisherDeccan, Indian Airlines-Air India and Jet –Sahara. This trend has major implications for competition issues on the civil aviation market. We examine the salient features of each of the three mergers below:

Jet –Sahara
The Jet-Sahara merger in April 2007 has raised a great deal of concern and issues on the market. With the merger in place, the merged entity with a fleet strength of around 79 aircrafts, has around 30% share of the passenger airline market. Also, as seen in an earlier section, the merged entity will have a major share of the market as well as of slots on a prime route such as Delhi-Mumbai which accounts for nearly 50% of domestic traffic. Jet would also have control over the fleet, landing and parking rights of Air Sahara in some airports. The merger therefore raises issues of predatory pricing and unhealthy competition in the passenger air transport sector.

Kingfisher-Deccan
The Kingfisher-Deccan merger in May 2007 has created major issues in the overall market structure of the passenger air transport sector. A number of synergies are expected as a result of the merger in terms of engineering, maintenance and overhaul. The merger has created an entity with around 80 aircrafts. The move to merge with Deccan also makes it possible for Kingfisher to enter the international arena. Thus Kingfisher can now conform to India’s policy which stipulates that an airlines must have five year’s experience in the domestic market and a minimum of 20 aircrafts before gaining permission to fly on international routes. With the merger Kingfisher now qualifies to fly on international routes. The merger is expected to save costs on operations, maintenance, ground and baggage handling, feeder services, engineering and security. However as our data analysis in an earlier section shows, it also raises competition issues. For instance in the Delhi-Chennai sector, Kingfisher has taken over the slots of Deccan, post merger. This raises issues in terms of pricing. It also raises the issue of removing a vigorous competitor from the market through a merger.

Air India-Indian Airlines
The two public sector companies merged into a single company called National Aviation Company in April 2007. The merged entity will operate on both domestic and international sectors. The new company will be among the top ten airlines in Asia and among the leading 30 airlines globally in terms of having a fleet of 120+ aircrafts and 34000 employees including 1315 pilots. It is the first airlines in India to have more than 100 aircrafts. The government has approved acquisition of new aircrafts –68 aircrafts by Air India and 43 by Indian airlines. Major gains that can be reaped from the merger include economies of scale in maintenance, ground operations, use of landing slots and parking rights, etc.

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Competition Issues in the Air Transport Sector in India

The government owned airlines face major challenges in terms of falling market shares under strong competition from private airlines and years of under investment in fleet strength and services. In fact our data indicates lower market shares for Indian Airlines compared to Jet in the three selected routes of study and also compared to Kingfisher in one route. In terms of slots also, in two of the selected routes, Indian Airlines has only one slot on one route and no slots at all in another. The merger by itself will not ensure efficient functioning. It needs to be followed up by measures like overhaul of operations and a strong professional staff. The Government expects that the merger will save around Rs 5000 crores annually.

Relevance of the Competition Act 2002
In order to draw attention to the competition related issues in the passenger air transport sector, we will examine it in the context of the Competition Act 2002. we will specifically examine Section 20(4) which refers to regulation of combinations given the wave of mergers happening in this sector. Section 20(4) of the Act notes that for the purpose of determining whether a combination would have the effect of or is likely to have an adverse effect on competition, the Commission shall have due regard to a set of factors. We examine these factors in the context of this sector: • Actual and potential level of competition through imports in the market

In an earlier section we have assessed the level of competition. The standard index for measuring the degree of competition is the Herfindahl Index of Concentration (HHI). Thus as seen in Table II.1, out of thirty city pairs, comprising of the metro cities, the HHI is over 1800 for 18 city pairs, thereby indicating concentration on the market. Of these, three routes were selected for more detailed analysis, namely, Delhi-Mumbai, Delhi-Chennai and Bangalore-Chennai. Apart from showing a concentrated market in 2006-07, an exercise was also carried out for the post merger scenario, assuming that the three major mergers between Jet-Sahara, Kingfisher-Deccan and Air India-Indian Airlines had happened. It is seen that for two routes out of the three, namely Delhi-Mumbai and Delhi-Chennai, the concentration index increases on the assumption of mergers taking place. Therefore, our data shows that there is cause for concern in terms of actual levels of competition in the post merger scenario. As far as the issue of imports into the market is concerned, in accordance with the Domestic Air Transport Policy, foreign airlines are not allowed to pick up equity directly or indirectly. Thus as per the Policy, while a domestic air transport operator may enter into financial arrangements with a bank and/or other financial institutions, for purposes of lease finance, hire purchase or other loan arrangements, such tie ups are not permitted with a foreign airline. Hence there is no question of competition through imports in this sector. • Extent of barriers to entry into the market

Public barriers to entry as well as private barriers will be analysed in detail in the next section. • Level of combination in the market

The three major mergers that have taken place in this sector over the past year have been discussed earlier. The concerns in terms of competition in this regard have also been analysed. The merger scenario certainly raises concerns of a less competitive environment, as our analysis shows. • Degree of countervailing power in the market

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Spice Jet. Even in the peak hours. Jet and Kingfisher own the major number of slots. three major players control a major share of the market. Jet operates one flight while Kingfisher operates two. while all the airlines are operating flights during the day. of the three flights operating. Jet and Indian have the major share. We have analysed data for three metro routes. However. Out of a total of 18 flights operating in this sector. Indigo and Jet Lite. as we have seen from our data analysis. • Market share. For instance in the Delhi-Mumbai route. 3 by Indian and 1 by Kingfisher. in the relevant market. there is a strong likelihood of prices rising and price collusion especially in peak hours and especially when the flights are timed close to one another. This obviously has price as well as profit implications as well as a change in the quality of service. Kingfisher and Jet have the major share. There are route wise variations in terms of extent of concentration and number of players. of the persons or enterprise in a combination. With the mergers happening. the trend may intensify especially in peak hours on the busy metro routes. The analysis of market share(passenger wise)for the pre merger scenario and slot wise for the post merger scenario is presented below. Due to unavailability of passenger wise data for the post merger scenario. thereby raising concern for competition. Thus we express a doubt as to whether there is a substantial degree of countervailing power available on the selected routes. Our analysis on pricing specifically in the Delhi-Mumbai route discussed earlier. • Extent of effective competition likely to sustain a market Post merger. of the 15 flights available. Jet and Kingfisher operate six each. concentration is certainly high and increasing. our analysis also showed replacement of Deccan with Kingfisher flights in 2008. while there are fifty five flights available during the day. the data for the latter scenario is presented slot wise. Thus while there are once again a number of operators operating on this route. route wise analysis of other routes would require to be made to reach assess degree of countervailing power in the peak periods across markets. The market is definitely oligopolistic and there is no indication of monopolistic trends. Jet and Kingfisher hold the maximum number of slots. As we have seen for the metro routes.Competition Issues in the Air Transport Sector in India This would depend upon the extent of presence of the players on the relevant market. in the peak hours it is obvious that Jet and Indian are controlling the major share of slots. Thus with the mergers happening. In fact of the nine flights available in the peak hours. post merger of the two airlines. • Likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices and profit margins. While there are a substantial number of players in the markets. on important routes. 3 are controlled by Jet. In the Delhi -Chennai sector. followed by Indian. individually and as a combination. On the Delhi-Chennai route. post merger. while there are 15 flights available. shows a substantial degree of price parallelism among the full cost carriers (Jet and Kingfisher) as well as among the low cost carriers (Deccan and Jet lite). However while the total number of flights indicates distribution among full cost and low cost carriers. followed by Kingfisher. ____________________________________________________asci research and consultancy 35 . it can be said that there are now seven players on the market. The Bangalore Chennai sector showed the same trend. During the peak hours. In any case mergers are expected to lead to greater scale economies resulting in higher profits through higher efficiency levels. As seen in our analysis of the three selected routes. the major share of the market is controlled by Jet and Kingfisher.

8 9.2 0 0 0 Source: Computed by the authors from the DGCA data Table IV.Competition Issues in the Air Transport Sector in India Table IV.0 7.81 21.0 9.81 20.6 7.8 9.0 Market Share(slot-wise) 24.8 16.6 18.7 12.0 5.2 0.7 7.0 19.1 0.7 9.4: Pre merger (2006/07)-Delhi-Mumbai (passenger wise) Carrier Jet Indian Kingfisher Air Sahara Air Deccan Air India Spice Jet Go Air Indigo Air India Express Paramount Airways Market Share (passenger-wise) 26.5: Post Merger(2008) -Delhi Mumbai (slot wise) Carrier Jet Kingfisher Indian Jetlite Deccan Go Air Indigo Spicejet Paramount Market Share (slots) 21.5 11.3 8.63 12.0 Source: Computed by the authors from the DGCA data ____________________________________________________asci research and consultancy 36 .09 0.72 5.27 3.45 9.1 3.4 0.

0 22.66 26.1 Market Share (slot-wise) 34.2 16.0 0.66 13.3 ____________________________________________________asci research and consultancy 37 .33 6.6 22.8 17.0 0.4 15.6 6.0 Source: Computed by the authors from the DGCA data Table IV.66 Source: Computed by the authors from the DGCA data Table IV.33 13.9 0.4 3.0 0.0 16.3 4.52 11.1 15.9 8.2 5.3 8.0 0.7 4.2 26.Competition Issues in the Air Transport Sector in India Table IV.6: Pre merger (2006/07)-Delhi-Chennai (passenger wise) Carrier Jet Indian Kingfisher Air Deccan Air Sahara Go Air Spice Jet Indigo Air India Express Air India Paramount Airways Market share (passenger wise) 29.9 8.6 0.7 7.5 0.6 8.1 NA NA 4.6 0.8: Pre merger (2006/07)-Bangalore-Chennai (passenger wise) Carrier Jet Kingfisher Deccan Indian Paramount Spice Jet Air sahara Air India Market Share 42.4 26.7: Post Merger(2008) -Delhi Chennai(slot wise) Carrier Jet Indian Kingfisher Spicejet Indigo Jetlite Market Share (slots) 26.1 NA 0.33 13.0 0.0 Market Share (slot-wise) 22.

55 0.27%. Post merger. • • The following are evident from the above analysis: Market share of Jet and Kingfisher have been strengthened considerably. Post merger. Indian had a share of 18. The above is a clear instance of removal of a vigorous competitor from the market.5% of market share(passenger-wise) pre merger. the correlation between share of passengers and the share of slots is very high. Jet now owns 32.33 22. pre merger.5% and Indian-Air India does not own any slot at all.6 of all the slots (including Jetlite). it is seen that Jet had a share of 25%.2% while Air Sahara had a market share of 8.Chennai (slot wise) Carrier Jet Kingfisher Deccan Indigo Paramount Spice Jet Air Sahara Market Share 33. In terms of slots.6% of the slots. Jet and Air Sahara were both full cost carriers and were indeed vigorous competitors. • Possibility of a failing business ____________________________________________________asci research and consultancy 38 . and Kingfisher had 17%. pre merger. post merger. including those of Jetlite (earlier Air Sahara).% and Kingfisher had a share of 10%. The national carrier is steadily losing its share to the above two private airlines. share of Kingfisher is 24. Air Sahara had 9.22 5. share of Jet has become 28.0 5.63% and for Indian-Air India it is 20%. Jet had 22% and Sahara 22 % of the slots. Post merger. Post merger. while Jet had 27%. In the Bangalore-Chennai route. Thus Jet and Kingfisher together hold 70.9%. as expected. Jet had a market share of 29. Jet owns 33. Thus the three combines now have around 73% of the total slots in this market.55 0.3% of the slots.Competition Issues in the Air Transport Sector in India Source: Computed by the authors from the DGCA data Table IV. Kingfisher owns 55.33 33. Jet now owns 28% of the slots. • Likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market. pre merger.9% of the slots in the market. Indian had 17% while Kingfisher had no share at all. in terms of slot shares. Jet has 32. Thus the three combines together own around 72% of the slots. Jet had 22% of the market. In terms of slots.9: Post Merger (2008) -Bangalore. Post merger. Jet had 35% of the shares. Notice that. Kingfisher which earlier did not have any slots has 13% and Indian -Air India combine has 26%.0 Source: Computed by the authors from the DGCA data Analysis as above of information shows the following: • On the Delhi -Mumbai route relating to slot shares of airlines pre merger. In the Delhi -Mumbai sector. Jet had 25% and Air Sahara 10% of the slots. On the Delhi Chennai route. Similarly. in the Delhi-Chennai sector.

Overall there is likely to be better utilization of resources in the economy. ____________________________________________________asci research and consultancy 39 . • Relative advantage by way of contribution to the economic development. As a result the airlines has been experiencing losses and inefficiencies. • Whether the benefits of the combination outweigh the adverse impact of the combination. rising price of fuel and other issues. higher efficiency and improvement of productivity levels in the industry. most of the airlines have been making major losses. While the merger by itself will not assure increase in efficiency.Competition Issues in the Air Transport Sector in India Due to vigorous price competition. Hence the possibility of a failing business looms very large in this sector. if any Let us consider the Indian Airlines -Air India merger. by any combination having or likely to have appreciable adverse effects on competition Mergers will lead to scale economies. For many years Indian Airlines has been experiencing falling market shares under competition from the private airlines. There have also been years of under investment in the fleet. Passengers will benefit from the fact that flight timings are likely to be rationalized and quality of service may improve with failing companies being acquired by the better performing companies. the resultant scale economies are expected to lead to better performance and the better utilisation of investment by the government.

To elaborate. Accordingly it needs to analysed in order to assess if there are barriers to entry in this sector. These guidelines may thus act as a barrier to entry for new entrants.Competition Issues in the Air Transport Sector in India V. at least 10% are to be deployed on services operated exclusively within the North Eastern region. In fact the new airlines may require a subsidy to operate on these routes. Thus. For the domestic air transport sector. Category I routes are comprised of the metros. for airlines operating with aircraft with take off mass equal to or exceeding 40000 kg. An important barrier is in the form of regulatory barriers. Category II routes comprise of the North Eastern region. the operator has to deploy at least 10% of the capacity he deploys on Category I routes. The study is expected to examine public barriers to entry in terms of policy regulations as well as private barriers to entry in the context of the three areas in the Competition Act In the context of all the three areas of the Competition Act. • Minimum equity and fleet requirements Equity and Fleet Requirements In order to obtain a permit. these guidelines create entry barriers for new airlines in several ways. of the latter to be deployed exclusively on Category II routes. Thus the type of aircraft required to serve a regional route may be different from those required on the metros and may thus require creation of a separate fleet. additional equity investment of Rs 20 crores are required. on Category III routes. Jammu and Kashmir. In addition. First. an applicant is required to have certain minimum paid up capital. Also the new carrier may be at a relatively greater disadvantage to spend on non-financially viable routes that the older players who are already operating on the market. Andaman and Nicobar and Lakshadweep and Category III routes comprise all routes other than I and II. While the above guidelines are meant to ensure that the uneconomical routes are served by all airlines in order to ensure equity and adequate dispersal of air transport facilities to these routes. The Policy lays down that any operator who operates scheduled air transport services on one or more of the routes under Category I shall be required to provide such service on Categories II and III as well in accordance with the following guidelines. for each addition of up to five aircrafts. Further. Jammu and Kashmir. one of the aspects to which the Competition Commission is expected to give due regard is the extent to which there exist barriers to entry on the market. on Category II routes. the Domestic Air Transport Policy lays down the regulatory framework for the sector. owning up to 5 aircrafts. Andaman and Nicobar and Lakshadweep. Further. II and III. the operator must deploy at least 50% of the capacity he deploys on Category I routes. a minimum capital of Rs 50 crores is required. The following aspects of the Domestic Air Transport Policy assume importance in this context: • Route Dispersal Guidelines The Ministry of Civil Aviation has divided all routes into categories I. it may be uneconomical for an airline to operate flights in all the routes due to financial as well as technical reasons. ____________________________________________________asci research and consultancy 40 .

A high equity ratio can become an entry barrier and thus create an undue advantage to carriers with high net worth. an airlines must have an experience of flying for five years on domestic routes and have a minimum of 20 aircrafts before applying for permission to fly internationally. This type of restrictions on foreign airlines exist in other countries as well. This regulation may be required for the airlines sector in India. The minimum fleet requirement is to ensure uninterrupted and safe operations. a minimum of five aircrafts seems reasonable. This is because even if a carrier were to begin operations on two or three distinct routes and assuming that they were not to duplicate the same aircraft for operations along these routes. The paid up capital will have to be raised to the above prescribed minimum levels by May 15 2008. Kingfisher has also started flying on international routes. It may be said here that this may not be too stringent a requirement for air carriers to meet. a key requirement is to ensure that the equity structure is not prohibitive enough to inhibit competition and entry of new carriers. as well as institutional knowledge required to operate on international routes. will ensure seriousness of both the owners as well as the venture capitalists. Given the extensive operational and management processes. Additionally. Procurement of contractors normally requires minimum performance guarantees while pre qualifying on the basis of several factors including financial net worth. for airlines operating with take off mass not exceeding 40000 kg. However. The US for instance. However. up to five aircrafts. This stipulation is obviously in favour of the existing incumbents such as Indian Airlines and Jet Airways. additional equity investment of Rs 10 crores will be required. In the context of the equity requirements laid down as above. a minimum fleet size of five aeroplanes or five multi engine helicopters is required. Seeking to prescribe minimum financial ownership by air carriers. This may therefore be looked into. a minimum capital of Rs 20 crores is required. for each addition upto five aircrafts. • Requirement of Domestic Flying for five years and a minimum fleet for flying internationally Under the existing policy regime. It may be noted here that prescribing minimum equity requirements is not an uncommon practice in several infrastructure sectors. does not permit foreign airlines to operate on domestic routes. the basis of minimum equity capital requirement laid down in the Policy is unclear. Therefore. It may be said that while the minimum of five years experience seems appropriate. the ____________________________________________________asci research and consultancy 41 . they would need at least three or four aircrafts with a spare of one aircraft. However the basis of arriving at the figure of five aircrafts as opposed to three or four is however not clear. especially those with less net worth. Thus foreign financial institutions and other entities can make an investment in this sector. • Foreign Equity Participation Foreign equity participation up to 49% and investment by NRIs upto 100% is permitted in this sector. foreign airlines are not allowed to pick up equity directly or indirectly. a minimum requirement in terms of years of experience is justified for pre qualifying air carriers. Thus. Further. creating a barrier to entry versus encouraging low net worth carriers can be a balancing act. Now with the merger of Kingfisher with Air Deccan. Therefore the policy prohibits foreign airlines from entering the market.Competition Issues in the Air Transport Sector in India Secondly. But tie ups with and holding of equity by foreign airlines are not permitted.

In addition. landing slots etc. There is also the issue of scale economies particularly in the post merger scenario. Kingfisher and Indian would obviously enjoy economies of scale due to their large size of fleet. Availability of slots and the existing practice of grandfathering of slots whereby preexisting ownership of slots by the incumbent airlines continue to be retained is also a major barrier to entry to the new airlines. • Usage of Airport Infrastructure consequent to Mergers Within the existing policy. The public sector carriers have also faced barriers to expansion that are “barriers to entry” as explained in the earlier section. maintenance and related costs.Competition Issues in the Air Transport Sector in India minimum fleet requirement of 20 aircrafts is debatable. Thus. However such user rights must be in use by the airlines that takes over. The earlier section has clearly shown how in the case of mergers allowing the airlines that is acquiring/merging with another airlines to take control of the slots of the latter is in fact strengthening dominance. The route distribution guidelines also act as a deterrent to the new players in the sense that it is not often economical for them to abide by these. currently. for example a small carrier that operates two or three flights a day may require no more than 4 or 5 aircrafts including spares to ensure continued operations. due to a range of different government policies. in comparison to the larger players who can afford to operate on many of these routes. The private barriers to entry are linked to the public barriers to entry or the policy related barriers as described above. the three major players namely Jet. in the context of mergers. Issues such as high capital costs in accordance with the requirements of the policy provide an advantage to the large carriers. This issue has implications for competition in this sector. 5 years of flight experience may be a misnomer since the air carrier may be in service for five years but may have flown far less flight hours than required to ensure safe operations. ____________________________________________________asci research and consultancy 42 . the airlines that takes over the aircraft pursuant to the merger/take over/sale/transfer is allowed the use of airport infrastructure including parking bays. otherwise they will be taken over by the Government /airport operator. The slot allocation policy has already been discussed in an earlier section. Therefore the minimum fleet requirement may be a larger barrier to entry than the 5 years of minimum flight experience.

These airports are in the metropolitan cities of New Delhi. the issue of slot availability especially during peak hours becomes a critical factor in achieving competitive advantage. Mumbai. Mumbai. Airports Authority of India and the Director General Civil Aviation. Further. These data were analyzed to comprehensively understand the slot allocation share held by various air carriers and the percent share during peak hours of the day when most of the customer demand exists. This is especially true in metropolitan cities where the demand is high especially during the morning and evening peak periods. Chennai. recognizing that the previously allotted slots mechanism to various air carriers at airports in and of itself creates a superior position in the competition ladder. i. the availability of slots to individual carriers bears significance. Methodology In order to understand the current slot allocation. the limited information available in the current literature points to a slot allocation policy wherein the slots allotted to various air carriers continue to be allotted without major changes. The following sections illustrate the evaluation of intensity with which various air carriers operate both from the standpoint of slots allotted to them as well as the passenger load carried. Given that all airports have capacity constraints. potentially. With more and more new operators interested in opening routes between cities of high demand while the existing operators themselves choose to expand their current operations. both in terms of available space and the ability to handle air traffic. To evaluate operations at various airports and the role played by previously allotted slots in creating competitive advantage. ____________________________________________________asci research and consultancy 43 . the slot allocation data were collected in hourly increments and were segregated by 9 air carriers. In addition to other considerations such as baggage handling and ground operations.Competition Issues in the Air Transport Sector in India VI. the number of flights between these 30 city– pairs combinations originating from and destined to these metros were studied. Bangalore. slot arrangement may be defined as the right to take off or land at particular times of the day at specific origins and specified destinations. The availability of slots and the scarcity to allot fresh ones at the airports is a challenge faced by the offices of the Ministry of Civil Aviation. In general. In general. Bangalore and Hyderabad. the latest available data for the 6 major airports in the country were analyzed. In addition to collecting data on the number of flights departing from these airports. To evaluate the intensity with which most airline carriers operate between city-pairs. which determines the competitive advantage of any air carrier. posing a competition disadvantage to new operators who would like to especially commence operations between the major city pairs. also termed as ‘time slots’. Slot Allocation Share One of the key elements addressed in this effort is with regard to the slot allocation within the air transport sector. A comprehensive and detailed discussion using the data for the year 2006-07 is embedded in various sections to analyze the slot allocation versus the passenger load share effects experienced by air carriers at the six metropolitan cities of New Delhi. Thus ‘grand fathering’ of slot allocation rights is routinely practiced and thereby. Analyse and discuss from the stand-point of competition among the carriers. Chennai. Kolkatta. Kolkata. and Hyderabad. the allocation of slots is one of the key and dominant factors. The time slots allotted to various operators at metropolitan cities in India were analyzed in order to understand the slot allocation during various time periods of the day. & VII.

This time series analysis helps to recognize that Jet Airways. Indian and Jetlite had 43%. Jet Airways equaled Indian at Hyderabad. and Deccan were the closest players in terms of slot availability at the various airports. In order to understand the slots allotted to various air carriers. baggage handling. It is worth noting that Jet Airways was allotted the maximum number of slots at 5 out of the 6 airports thereby making it the dominant player in the air transport sector (based on slot allocation share at the 6 metropolitan airports). Figure S9 comprises the data for all the 6 airports while Figures S10 to S15 are for the 6 metropolitan airports evaluated individually. These analyses help conclude that the three major air carriers in terms of slot allocation are Jet Airways. the flight departure data. a total of 571 slots were available at the 6 metropolitan cities with Mumbai capturing the most at 148 slots followed by New Delhi. 40% and 39% slots during the peak four hours of the day indicating their desire and preference for peak time slots. and security check. Jet Airways is followed by Indian with 91 slots (16% share). only 26% of all the slots which Jet Airways had were during the peak 4 hours of the 24-hour time period. Figures S9 to S15 show the slot assignment in 2-hour increments except for the midnight hours of 1200 to 400. Slot Allocation by Time of the Day As noted earlier. Figure S1 shows the slot allocation by individual air carriers at all the 6 metropolitan airports. In general. Following this. This report presents the two-hourly analyses due to reasons noted above. In fact. an hourly analysis was also completed. Indian and Jetlite. Bangalore. Jet Airways did not figure in the peak 4-hour slot analysis as being allotted the maximum number of slots. It may be noted that the data were analyzed by the specific time slots and the competing air carriers during those time slots. and 5 to 6 P. Interestingly. Mumbai. which equates to 27 per cent of all slots allotted during the day. In terms of the slot allocation share. most air carriers were allotted between 1 and 5 slots during both the peak and off peak hours of the day. was analyzed to identify the variation in slot assignment for individual air carriers at individual airports by the hour of the day during a 24 hour period. A similar analysis was completed for 6 airports in terms of the slot allocation share at these individual airports. though. Chennai. Kingfisher. time frame. which is synonymous with slot allocation. a segmentation analyses was completed at two levels: (a) For the six airports collectively and (b) By individual airport. gate access and onboard checking. Kolkata and Bangalore respectively. Chennai and Kolkatta with 125. 73 and 52 slots respectively.M.M respectively with 16 and 17 slots respectively. 76. Thus Mumbai and New Delhi account for about 47 per cent of all the slots available at the six metropolitan cities. 97. a two hour peak is chosen both for the morning and evening hours. Jetlite. Jet Airways had the maximum share of 154 slots. Jetlite with 79 slots (14%) and Deccan with 74 slots (13%).Competition Issues in the Air Transport Sector in India Slot Allocation Analysis A review of the data has indicated that for the month of July 2006. Hyderabad. for the purpose of this analysis. Figures S2 to S7 show the slot share at Hyderabad. In addition to other ground operations is carried out. As seen from the figure. Figure S8 shows the number of slots allotted for all the 8 air carriers at the 6 metropolitan airports. it is understandable that Jet Airways has the maximum number of slots allotted to it. As seen from Figure S9 the morning two ____________________________________________________asci research and consultancy 44 . Given that Jet Airways primarily operates from the Mumbai airport and also noting the fact that Mumbai happens to rank the first with regard to number of departing flights. ii. Indian and Jetlite continue to hold not only the maximum number of slots during a day but also the most during both morning and evening peak periods. New Delhi. Since the logistics employed by any air carrier at all airports comprises approximately a 2 hour window during which the process of seat assignment. Indian. It may be noted that Jet Airways was allotted the maximum number of slots during both the morning and evening peak hours of 6 to 7 A.

The evening peak extended from 1600 to 2200 hours with a total of 39% slots.Competition Issues in the Air Transport Sector in India hours peak for all the 6 metros is 600 to 800 hours where 87 of the 571 slots are allotted. As such. GoAir and Deccan had 38%. This peak was during the hours of 600to 800. the 2 hours during which 21%. the morning peak of 600 to 800 hours were allocated 14% of the daily slots while the following 2 hours were allotted 13%. The evening peak of 1600 to 2000 hours comprised 144 slots in 4 hours or 13% each in two-hour increments. Hyderabad experienced vivid peak and off-peaks with the lowest daily allocation of 4 slots between 1200 and 1400 hours. the evening 6 hours ranging from 1600 to 2000 hours were allotted the most slots. Chennai and Bangalore airports. Figure S16 shows the percent of slots allotted to various air carriers during their respective 4 peak hours of the 24hour day. The peak extends further with a small decline to 12% or 69 slots from 2000 to 2200 hours. The evening peak however. Unlike several other airports. The maximum number of slots was allotted between 600 and 800 hours. New Delhi has an evening peak of 2000 to 2200 hours with 15% of slots allotted during this period. During the evening period the 1600 to 1800 peak 2 hours accounted for 16% of the total daily slots. Mumbai is the only airport that has flight departures occurring during any 2 hour period of the 24 hour day. The evening peak was between 1800 and 2000 hours where 17% of the slots were allotted. New Delhi experiences a morning peak with 16% of daily slots. As in case of all airports across the country. ____________________________________________________asci research and consultancy 45 . New Delhi. As seen from Figure S13. especially Mumbai. Slot Allocation During Peak Four Hours of the Day For better understanding the slot allocation to various air carriers during the peak hours of the day. was prominent between the hours of 1600 and 1800 were 14% of the total daily slots were allotted. At the Mumbai airport as shown in Figure S11. Of the 6 metros. In summary. For example all airports had approximately two consecutive two hour peak periods in the morning while in the afternoon there were three two hour peak periods ranging between 1600 and 2200 hours. This equals 15% of the total daily slots. The previous 4 hours were allotted a total of 28% of the daily slots. Bangalore experienced a morning peak between 600 and 800 hours with 15% of daily slots and was followed by 14% between 800 and 1000 hours. For example Kingfisher had morning and evening peak slot assignment during 600 to 800 hours and 1600 to 1800 hours while Deccan experienced morning and evening peaks during 800 to 1000 and 2000 to 2200 hours. In case of Chennai. Chennai appeared to have experienced less off-peak slot variation. an analysis was completed by selecting the peak two hours in the morning and peak two hours in the evening. the four peak hours are not the same for individual air carriers. it may be noted that the peak hours with regard to slot assignment were approximately the same for all the cities especially in terms of the trends they follow. all the slots were allocated to various air carriers. The evening peak was again stretched between 1600 and 2200 hours with a total of 32% slot allocation. the morning peak hours were from 800 to 1000 hours with 14% of total daily slots while the previous two hours were allotted 12%. This Figure shows that the evening peak is more stretched than is the morning peak as illustrated by the fact that the morning 4 hours extending from 600 to 1000 hours comprised a total of 28% slots while the evening 6 hours extending from 1600 to 2200 hours were allotted to a total of 213 slots or 38% of the daily total. Slot Allocation at Individual Airports Figure S10 shows the slot allocation in two-hour increments at the airport of the 76 slots available at the Hyderabad airport. 36% and 36% slots during peak periods. the mid day slot assignment ranged between 5% and 7% of the total daily slots. Kingfisher and Indian each had 43% of their respective slots during the morning and evening peak 2-hour periods while Jetlite. Kolkatta also had a morning peak of 600 to 800 hours wherein 13% of the total daily slots were allotted with the following 2 hours carrying 10%. The evening peak extended from 1800 to 2000 hours where 22% of daily slots were allotted.

It may be noted from these figures that there was a great degree of variation with which these air carriers operated not only between city pairs but also form individual airports. 15. It may be noted that the passenger volume ranged between 1. Passenger Share Data Collection and Analysis Methodology A comprehensive data collection effort was completed for the April 2006 to March 2007 time period for 11 air carriers. the passenger share analysis was completed. These data are plotted in Figures S17 to S46.498 in the month of July 2006 and 1. Air Sahara was in operation which later underwent an acquisition and as a result the change over to Jetlite. Slot data is from the month of July 2006. a total of 2. Though Indigo passenger data were available. From the data that was collected for the 30 city-pair combinations.407. Figure P1 shows the variation of the travel demand during the months of April 2006 to March 2007. Given that 6 metropolitan airports are considered for the analysis.295. A total of 17. The monthly average passenger traffic was 1.4% of the total passenger load for the 9 air carriers.620. Similar to the slot allocation share analysis.631. Figure P3 shows the passenger share for all the 9 air carriers operating from the 6 metropolitan airports. all other carriers approximately one-third or more of their slots during the 4 peak hours. the data were segregated by individual airports so as to assess the passenger share of each air carrier individually. the data is not a part of the analysis. Since passenger traffic data is available in monthly increments from April 2007 to March 2007. Figure P2 shows the passenger traffic at the 6 metropolitan airports considered for this analysis. a total of 4. Therefore.8%.9% respectively. The data collected from the DGCA office was analyzed to understand the dominance of individual air carriers and their operations at the 6 metropolitan airports.891 passengers were carried by Jet Airways.07 for 11 air carriers out of which 9 are used for the passenger share analysis.Competition Issues in the Air Transport Sector in India Excepting SpiceJet. It may be noted that during 2006-07 time period. Given that the slot share data comprised 8 air carriers. which also shows that the uniform rates of travel was performed during the year. a two level-segregated analysis was completed. With regard to the traffic generating from Hyderabad. a total of 30 city-pair combinations are possible. on an average these 5 airports carried approximately 2.695. Jet Airways was followed by Indian. the passenger share data for the same air carriers was evaluated for the year 2006-07. since the slot data was not available for the air carrier due to it commencing operations after July 2006.119. iii.220. It may be noted that for the year March 2006 to April 2007. Aircarrier Slots by the Hour In order to understand the timeslots during which various air carriers operated their flights.930. Hyderabad had the lowest passenger traffic amongst these 6 metropolitan airports in relation to passengers flown to the other 5 metropolitan airports.281 passengers have flown to the other 5 metropolitan cities.766 in the month of December. Deccan and Kingfisher with passengers load share of 18. The Director General Civil Aviations Office provided the data for the year 2006 . the analysis reflects the name Jetlite as opposed to Air Sahara for the sake of comparison with the slot allocation share analysis.746 passengers. Only 8 air carriers comprise the framework of this effort.041. This Figure illustrates that there had been very little variation in the passenger demand. As seen Figure P2 Mumbai carried the most passengers at 4. The remaining air ____________________________________________________asci research and consultancy 46 .426.574 passengers were flown from the 6 airports by the 9 air carriers during the year 2006-07. First. a quick evaluation was performed to understand the monthly variations in passenger demand. which amounts to 27.003. hourly data was collected and analyzed for the 30 city-pair combinations resulting from the 6 metropolitan airports.9% and 11.028 and was closely followed by New Delhi with a passenger load of 4.

It may be noted from this Figure that Jetlite. Chennai. As seen from Figure P14.4% and 20% passenger load share respectively. Figures P11 to P16 show the percentages of slots allotted and passengers carried at Hyderabad. Jet Airways carried the most passengers with a load share of 32.4% and 10. Jet Airways carried the maximum passenger load share of 29.6% and 2.5% passenger load respectively. 10. Jet Airways with a share of 31. Deccan. Indian carried the most passengers with 20. Figure P10 shows the slot allocation share and the passenger volume share for the 6 metropolitan airports collectively and the 8 air carriers individually.1% and 11% respectively while Indigo had the lowest passenger of 1.6% and 4.8% and 12.5% respectively. at the Chennai airport. Indian and Jetlite carried 15.180 passengers and a share of 0. Kolkatta and Bangalore respectively.5%. Indian. Slot Share and Passenger Share Comparison Slot Allocation Vs Passengers Carried In order to understand the quantitative distribution of slots allotted to various air carriers and the passenger volumes carried by them during the year 2006-07. Spice Jet and Kingfisher were the air carriers that had more slot allocation share in relation to the ____________________________________________________asci research and consultancy 47 . Figure P5 shows the passenger share and load for New Delhi. At Hyderabad except for Go Air and Kingfisher. Indigo. At the New Delhi and Mumbai airports.7% respectively. Given that the possibility exists for individual air carriers to dominate at some airports in relation to others. again. New Delhi.5% traffic respectively. the passenger load and share analysis was separately performed for the 6 airports. Figure P8 shows the passenger load share for Kolkatta. except for Spice Jet. iv. Kingfisher and Deccan carried 12. Go air carried the lowest passenger volume of 18.1%.8% followed by Indian and Deccan at 21.8%.044 or 0.4% of all passenger air traffic to the other 5 airports and is followed by Kingfisher and Deccan at 17% and 15. Indigo carried almost no traffic with barely 18. Jet Airways and Air India carried more passengers as a percentage of the total volume in relation to the percent of slots allotted to them.1%. at Hyderabad. Jet Airways carried 28.8%.3% respectively. Go Air and Kingfisher other air carriers had more passenger share than the slot allocation share. Indigo and Go Air accounted for the lowest passenger load at 4. again carried the lowest passenger load share of 2.6% amongst the domestic carriers. Go Air and Indigo carried the lowest passenger load share of 3. Deccan which had a share of 18. Figure P3 illustrates the passenger loads and the share of the 9 air carriers.2% respectively. 12.8 and 10. Figure P7 shows the passenger load share for Chennai where. Figure P9 shows the passenger load share for the city of Bangalore. a comparative analysis of ‘slots allotted ‘ and ‘passenger load’ was completed. Jet Airways and Indian carried peak passenger volumes of 23. The comparative analysis was performed by using the percentage data for both the parameters. Indigo carried the lowest passenger share of 2. the remaining air operators carried more passengers in relation to the slots allotted to them.9%.4% and 20% respectively while Deccan. Jetlite and Kingfisher carried passenger load shares of 15.3%.4% thus accounting for more than 160% of its closest rival.4%. Spice Jet. Figure P6 shows the passenger load share for Mumbai. 13.9% passenger share.5% of the total passenger load destined the other 5 metropolitan cities.5% and 10. Kingfisher and Spice jet accounted for 16. Off the air carriers that operate domestically. Jetlite.5% of all traffic to the other 5 airports rank the highest with double digit lead over Indian with a passenger share of 18. Jetlite and Kingfisher followed at 16. Mumbai.Competition Issues in the Air Transport Sector in India carriers had percentage of load share of less than 10% each. Indian. Jet Airways closely followed with a 20% passenger share while Deccan.1% respectively. Figure P4 shows the passenger share for the 9 air carriers. Go Air and Kingfisher had more slots allotted as a percentage in relation to the passenger volumes carried.

It is important to note that the smaller the value. At New Delhi. Spice Jet. Figure U1 shows the analysis chart for the 6 metropolitan airports. as described above.8% advantage reflects that Jetlite has more slots compared with the passenger share it had carried.5% of all passenger traffic destined to the other 5 metros while only 4.1% and 0. Figure P17 to P25 show the advantage. Kingfisher. At the Kolkatta and Bangalore airports Spice Jet and Kingfisher were the air carriers which had more slots allotted to them than the passenger share as a percentage of the total volume. Jet Airways (3rd and 4th highest at 3 airports each) et cetera had the greatest advantage over other carriers.1% (9. The advantage for Kingfisher ranged between 6. Slot Share Advantage Over Passengers Carried The data analysis discussed above were further segregated and evaluated by individual air carriers so as to identify those operators who had slot share advantages over passengers carried. further analysis was conducted to arrive at unit level measures of slots vis-à-vis passenger loads.6% slots share at all the 6 airports combined and 9.6%) disadvantage by using slot share as a reference point. thus Jetlite which had 7.7% passenger share implies that it has a 2. by far had the greatest advantage with regard to slot allocation as seen Figures P20 to P22.minus Passenger Share’.4% slots were allotted to the air carriers. higher the number. v. Spice Jet as seen from Figure P19 generally had an advantage in that except for Hyderabad. illustrates that a certain degree of disparity exists with regard to the allotted slots compared with the passenger load. Jet Lite (2nd highest unit rate at 5 of 6 airports). As seen from this figures Go Air consistently had the lowest unit slot rates indicating high utilization rate while carriers such as Air India (highest unit rate at all six airports). Indian. Deccan.7% . Kingfisher had a 10. Jetlite has a slot share disadvantage at all the airport including the 6 combined metros.3% as measured by the ‘slots share minus passenger share concept’. For example from Figure P17 it may noted that Jetlite had a slot share advantage at Mumbai and Chennai airports. and Jet Airways followed with 49.Competition Issues in the Air Transport Sector in India passenger share. Unit Slot and Passenger Analysis Slot Allocation per Million Passengers A detailed data analysis. Air India ranked the highest with 115 slots per million passengers carried during the year 2006-07. while Air India was a great advantage since it had the maximum unit rate. Jetlite. Therefore. Go Air had the maximum utilization over other air carriers during 2006-07. Jet Airways and Air India as seen from Figures P22 to P24 are at a disadvantage with regard to the slot allocation. given that it had the best utilization of slots in relation to the passengers carried. The marginal 0. as seen from Figure 18 illustrates that it has a considerably disadvantage in terms of the slots allotted as compared with the passenger load. Conversely.8. Figures U2 to U7 show the unit rates (slots per million passengers) for the 6 metropolitan cities individually. Thus except for Mumbai and Chennai. The remaining air carriers operated at rates below 30 slots per million passengers. ____________________________________________________asci research and consultancy 48 .3% and 16. Figure P20 shows that Chennai. the better the utilization and / or the allocation of the slots. Deccan carried 15. Thus.1% slot share advantage when viewed from the standpoint of the 6 metropolitans combined. The data shown in this Figures are calculated using the formula ‘Slot Share . the more the advantage a particular air carrier has over others. Kolkatta and Bangalore were the only airports where Go Air was at a disadvantage. 34 and 33 slots per million passengers respectively. which individual carriers have in relation to the slots allotted. it has more slots allotted than the passengers carried.

Therefore. the greater the likelihood of passenger using that specific air carriers. a correlation analysis was conducted. thus indicating that the more the slots allotted for a particular air carrier. Correlating Passenger Traffic Slot Allocation Given that the larger the number of flights available from a particular air carrier. ____________________________________________________asci research and consultancy 49 . This data analysis has shown a co-relation value of 0.Competition Issues in the Air Transport Sector in India vi. it may be noted that slot allocation policy will have a significant b on the potential for capturing the demand.88. The 2006-07 passenger traffic for individual air carriers between the 30 city-pair combinations was examined for the possibility of a co-relation with allotted slots. the options available to the passengers increase and thereby contribute to the utilization of passenger demand.

Hyderabad 25 30% 24% Number of Slots 20 15 10 5 20 25% 20% 17% 13% 15% 10% 15% 10% 7 5 4 8 6% 11 12 9% 14 5% 5% 1% 0 Kingfisher SpiceJet Jetlite Jet Airways IndiGo Go Air Slots Deccan Indian Percent Slots Allotted 1 0% Air India ____________________________________________________asci research and consultancy 50 .Competition Issues in the Air Transport Sector in India Figure S1: Slot Allocation at Six Metropolitan Airports Slot Allocation by Air Carrier .6 Metro Airports 150 23% 20% 25% Number of Slots 15% 134 119 11% 9% 9% 65 7% 51 39 4% 26 52 87 0 Kingfisher SpiceJet Jetlite Jet Airways IndiGo Go Air Slots Deccan Indian Percent Slots Allotted 8 1% 0% Air India Figure S2: Slot Allocation at Hyderabad Slot Allocation by Air Carrier .

Competition Issues in the Air Transport Sector in India Figure S3: Slot Allocation at Mumbai Slot Allocation by Air Carrier .Mumbai 40 35 26% 30% 25% 20% 18% 16% Number of Slots 30 25 20 25 15 10 5 0 Kingfisher SpiceJet Jetlite Jet Airways IndiGo Go Air Slots Deccan Indian 37 15% 10% 5% 1% 8% 7% 8% 9% 7% 11 11 12 10 10 23 2 0% Air India Percent Slots Allotted Figure S4: Slot Allocation at New Delhi Slot Allocation by Air Carrier .New Delhi 30 25% 20% 20% 17% Number of Slots 25 20 25 20% 15% 22 10% 9% 26 15 10 13 5 0 Kingfisher SpiceJet Jetlite 11 12% 10% 5% 3 2% 15 6% 8 4% 5 0% Jet Airways IndiGo Go Air Slots Deccan Indian Air India Percent Slots Allotted ____________________________________________________asci research and consultancy 51 .

Chennai 25 27% 30% 25% 20% 20 Number of Slots 20% 16% 15 10 15 5 5 0 7% 4% 20 14% 11% 15% 10% 10 12 5% 1% 3 8 0 1 0% 0% irw ay s Ai r te In di G o D ec ca n gf is he r Je ia Je tli G o In d ce Sp i Ki n Je tA Slots Percent Slots Allotted Figure S6: Slot Allocation at Kolkata ____________________________________________________asci research and consultancy 52 Ai rI nd ia n t .Competition Issues in the Air Transport Sector in India Figure S5: Slot Allocation at Chennai Slot Allocation by Air Carrier .

2008 30 25 30% 25% 23% 24% Number of Slots 20 15 25 24 13% 11% 9% 7% 11% Ai rI nd ia n t 20% 15% 10% 5% 1% 10 11 5 0 Kingfisher SpiceJet Jetlite Jet Airways 14 9 7 2 1 2% 11 0% IndiGo Go Air Slots Deccan Indian Air India Percent Slots Allotted ____________________________________________________asci research and consultancy 53 .Bangalore .Kolkata 14 12 25% 30% 25% 20% 17% 17% Number of Slots 10 8 6 9 4 2 0 13 15% 13% 10% 12% 9 10% 7 5% 0 0% 6 3 0 5 6% 0% 0% irw ay s Ai r te In di G o D ec ca n gf is he r Je ia Je tli G o In d ce Sp i Ki n Je tA Slots Percent Slots Allotted Figure S7: Slot Allocation at Bangalore Slot Allocation by Air Carrier .June 2.Competition Issues in the Air Transport Sector in India Slot Allocation by Air Carrier .

.0 .6 Metros 100 90 80 70 60 50 40 30 20 10 0 02.0 .0 . 5 .59 018 17 . 59 Number of Slots 16% 14% 14% 14% 15% 7% 43 5% 30 39 7% 5% 29 3 1% -3 .9 13 14 .0 .59 021 20 .59 00 -5 6.0 .59 00 -4 5.0 .5 9 Kingfisher Go Air SpiceJet Deccan Jetlite Indian Jet Airways Air India IndiGo Figure S9: 2-Hour Slots – 6 Metropolitan Airports Slot Allocation by TIME .59 022 21 .59 016 15 .59 00 -7 8. .59 011 10 .59 00 -3 4. .0 .5 9 0% 011 :5 9 013 :5 9 015 :5 9 017 :5 9 019 :5 9 021 :5 9 023 :5 9 -5 :5 9 -7 :5 9 -9 :5 9 18% 16% 14% 12% 10% 8% 6% 4% 3% 2% 0% 92 81 80 80 86 3.0 .0 8: 00 10 :0 12 :0 14 :0 16 :0 18 :0 20 :0 Slots Percent Slots Allotted ____________________________________________________asci research and consultancy 54 22 :0 16 .59 00 10 -9 . 00 4: 00 2 6: 00 00 .59 013 12. .59 015 14 .0 .0 .59 020 19 . .59 019 18 . .59 00 -8 9.0 .59 023 22 .59 017 16 .59 00 -6 7.0 0.59 023 .59 012 11 .Competition Issues in the Air Transport Sector in India Figure S8: Time Slots of Individual Aircarriers Slot Allocation by Air Carrierand Time 20 18 16 14 12 10 8 6 4 2 0 00 .0 . .0 02 3.0 .

5 9 2% 017 :5 9 0% 011 :5 9 013 :5 9 015 :5 9 -5 :5 9 -7 :5 9 -9 :5 9 0% 6: 00 8: 00 3.Competition Issues in the Air Transport Sector in India Figure S10: 2-Hour Slots – Hyderabad Slot Allocation by TIME .0 4: 00 10 :0 12 :0 14 :0 16 :0 Slots Percent Slots Allotted ____________________________________________________asci research and consultancy 55 .Hyderabad 18 16 14 12 10 8 6 4 2 0 02. 59 25% 18% 15% 15 12 13 11% 9 7% 6 5% 4 2 2 019 :5 9 021 :5 9 18 :0 20 :0 22 :0 023 :5 9 Number of Slots 20% 16% 16 20% 15% 10% 5% 2% 4% 0 0 3 0% -3 . 00 00 .

00 4: 00 8: 00 10 :0 12 :0 14 :0 16 :0 18 :0 20 :0 Slots Percent Slots Allotted Figure S12: 2-Hour Slots – New Delhi Slot Allocation by TIME .5 9 1% 023 :5 9 -5 :5 9 20% 18% 16% 14% 12% 10% 8% 6% 4% 3% 2% 0% Number of Slots 0 1 00 . 59 0% -3 . 59 1% 011 :5 9 013 :5 9 015 :5 9 017 :5 9 019 :5 9 021 :5 9 023 :5 9 -7 :5 9 -5 :5 9 -9 :5 9 18% 16% 14% 12% 10% 8% 6% 4% 3% 2% 0% Number of Slots 20 1 1 6: 00 00 .5 9 12 17 10 0 02.0 6: 00 3. 00 4: 00 Slots Percent Slots Allotted ____________________________________________________asci research and consultancy 56 22 :0 4 .Competition Issues in the Air Transport Sector in India Figure S11: 2-Hour Slots – Mumbai Slot Allocation by TIME .New Delhi 25 18% 22 :0 4 15% 12% 23 18 17 8% 15 6% 6% 10 5 8 4% 19 14% 13% 011 :5 9 013 :5 9 015 :5 9 017 :5 9 019 :5 9 021 :5 9 -7 :5 9 8: 00 10 :0 -9 :5 9 12 :0 14 :0 16 :0 18 :0 20 :0 20 15 10 8 5 0 02.0 3.Mumbai 25 16% 20 15 23 13% 13% 12% 9% 8% 6% 8 11 14% 19 19 5 6 4% 1% -3 .

5 9 0 02.Chennai 14 20% 18% 16% 14% 12% 10% 8% 6% 4% 1% 2% 0% Number of Slots 12 10 8 7% 5 10 14% 12% 8% 7% 6 5 6 9 8% 9 9 12% 12% 13 18% 6 4 2 1 0 1% -3 . 59 20 :0 Percent Slots Allotted 22 :0 1 17% 15% 12% 9 8 9 10% 5 8 17% 15% 6% 3 4% 2 2 4% 0 013 :5 9 6: 00 8: 00 015 :5 9 017 :5 9 019 :5 9 011 :5 9 10 :0 12 :0 14 :0 16 :0 0% -3 .5 9 0% 021 :5 9 023 :5 9 -5 :5 9 -7 :5 9 -9 :5 9 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 0% Number of Slots 0 00 .Competition Issues in the Air Transport Sector in India Figure S13: 2-Hour Slots – Chennai Slot Allocation by TIME . 59 0% 011 :5 9 013 :5 9 015 :5 9 017 :5 9 019 :5 9 021 :5 9 023 :5 9 -9 :5 9 -5 :5 9 -7 :5 9 4: 00 6: 00 00 .0 3.Kolkata 10 9 8 7 6 5 4 3 2 1 0 02. 00 8: 00 14 :0 10 :0 12 :0 16 :0 18 :0 Slots Figure S14: 2-Hour Slots – Kolkata Slot Allocation by TIME . 00 4: 00 0 6 Slots 18 :0 ____________________________________________________asci research and consultancy 57 20 :0 Percent Slots Allotted 22 :0 .0 3.

00 4: 00 6: 00 8: 00 16 12 10 14 Slots 18 Percent Slots Allotted Figure S16: Slots during Peak 4-Hours Percent Slots During Peak 4 Hours of the Day 60% 50% 38% 35% 31% 34% 29% 31% 40% 37% 0% an Je tli te ca n he r Je t ay iG Ai r In di Sp ic e is Ai rw In d o D ec In Ai r di a o s Ki ng f ____________________________________________________asci research and consultancy Je t 58 G 20 22 5 .Competition Issues in the Air Transport Sector in India Figure S15: 2-Hour Slots – Bangalore Slot Allocation by TIME .5 9 .Bangalore 18 16 14 12 10 8 6 4 2 0 .0 02 Number of Slots 15% 13% 14% 13% 14% 7% 7 6 6% 7 7% 4% 1% -3 .5 9 0% 7: 59 -5 :5 9 -7 :5 9 -9 :5 9 1: 59 3: 59 5: 59 9: 59 1: 59 :0 01 :0 01 :0 01 :0 01 :0 01 :0 02 :0 02 3: 59 18% 16% 14% 12% 10% 8% 6% 5% 4% 2% 0% 16 15 14 14 15 1 0 4 00 3.

59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines 0 Time Slots Figure S18: Slot Distribution – Hyderabad to New Delhi Hyderabad to New Delhi (02.59 18.00-4.59 8.59 18.00-4.00-8.2008 .Monday) 5 No.00-14.00-14.00-22.00-16.00-12.59 22.59 4.59 14.00-20.00-6.59 16.59 6.00-6.59 20.00-22.00-2. of Flights 4 3 2 1 10.00-10.59 22.00-16.59 00.59 4.59 12.00-8.00-10.59 14.59 8.00-12.59 16.59 6.Competition Issues in the Air Transport Sector in India Figure S17: Slot Distribution – Hyderabad to Mumbai Hyderabad to Mumbai (02.59 Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 59 .59 12.59 00.06.2008 .00-18.Monday) Air India No. of Flights 4 3 2 1 0 10.59 20.06.00-20.00-18.00-2.

59 4.59 12.59 22.59 14.00-2.2008 .59 4.00-10.59 20.59 6.00-2.59 18.00-22.00-20.59 6.59 8.00-18.00-16.00-14.00-6.59 00. of Flights 3 2 1 0 10.00-12.59 16.59 18.00-4.Monday) 3 No.00-14.59 20.00-20.59 12.59 8.Competition Issues in the Air Transport Sector in India Figure S19: Slot Distribution – Hyderabad to Chennai Hyderabad to Chennai (02.59 22.00-6.59 16.00-22.00-8.00-8.00-18.00-12. of Flights Air India 2 1 0 10.00-10.59 00.06.00-4.59 14.2008 .06.59 Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S20: Slot Distribution – Hyderabad to Kolkata Hyderabad to Kolkata (02.59 Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 60 .Monday) Air India Indian No.00-16.

59 18.59 16.59 22.2008 .00-4.00-18.00-12.Monday) 4 No.06.59 14.59 20.00-10.59 18. of Flights Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 61 .59 No.59 6.59 4.00-6.00-10.00-22.59 16.00-2.Competition Issues in the Air Transport Sector in India Figure S21: Slot Distribution – Hyderabad to Bangalore Hyderabad to Bangalore (02.00-4.00-16.59 6.59 22.59 4.59 00.59 12.00-8.59 12.00-20.00-20.00-6.00-2.59 14.00-12.00-14.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S22: Slot Distribution – Mumbai to New Delhi Mumbai to New Delhi (02.59 8.06.00-16.59 00.00-8.2008 .Monday) 7 6 5 4 3 2 1 0 10.59 20.00-22.00-18. of Flights 3 2 1 0 10.59 8.00-14.

59 Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 62 .59 14.59 18.59 22.59 00.06.59 14.59 20.59 6.59 12.00-8.00-10.Monday) 5 No.00-12.00-12.59 22.59 16. of Flights 4 3 2 1 10.Monday) 4 No.00-22.00-22.59 4. of Flights Air India 3 2 1 0 10.00-18.00-2.59 6.00-20.06.59 00.59 12.00-6.00-16.59 8.00-10.00-18.00-6.2008 .00-16.2008 .00-20.Competition Issues in the Air Transport Sector in India Figure S23: Slot Distribution – Mumbai to Chennai Mumbai to Chennai (02.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines 0 Time Slots Figure S24: Slot Distribution – Mumbai to Kolkata Mumbai to Kolkata (02.00-14.00-2.00-4.59 20.00-8.59 8.00-14.59 16.00-4.59 4.59 18.

00-16.59 00.59 20. of Flights 4 3 2 1 0 10.00-16.59 14.00-10.00-4.59 12.Competition Issues in the Air Transport Sector in India Figure S25: Slot Distribution – Mumbai to Bangalore Mumbai to Bangalore (02.59 20.00-2.59 16.Monday) 4 No.00-2.00-22.00-18.59 6.59 14.00-12.00-6.2008 .2008 .59 18.59 12.00-12.00-20.59 22.59 8.59 4.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 63 .00-20.00-8. of Flights 3 2 1 0 10.59 16.00-4.59 18.06.00-14.00-8.00-22.00-14.59 6.59 8.59 00.59 4.59 22.00-10.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S26: Slot Distribution – Mumbai to Hyderabad Mumbai to Hyderabad (02.00-18.00-6.06.Monday) 5 No.

59 14.59 16.59 12.00-10.06.00-16.00-4.00-20.00-4.00-14.2008 .00-2.00-6.59 00.00-12.59 18.59 8.00-2.00-8.06.59 22.59 6.00-18.59 22.Monday) 4 No.00-22.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 64 .59 6.00-22.59 14.00-18.59 12.00-12.2008 .Monday) 4 No.00-6.00-20. of Flights 3 2 1 0 10.00-16. of Flights 3 2 1 10.59 4.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines 0 Time Slots Figure S28: Slot Distribution – New Delhi to Kolkata New Delhi to Kolkata (02.59 18.59 20.59 4.00-8.59 8.59 16.59 00.00-10.59 20.00-14.Competition Issues in the Air Transport Sector in India Figure S27: Slot Distribution – New Delhi to Chennai New Delhi to Chennai (02.

of Flights 3 2 1 0 Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 65 .59 16.00-16.59 16.59 8.59 22.00-18.00-10.59 20.00-8.00-22.00-2.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S30: Slot Distribution – New Delhi to Hyderabad New Delhi to Hyderabad (02.00-22.59 20.00-16.59 12.Monday) 5 No.59 18.00-6.Monday) 4 Air India Indian Deccan Go Air IndiGo Jet Airw ays 10.2008 .59 22.00-10.59 00.59 6.06.59 18.00-14.00-4.59 4.00-14.00-8.59 6.59 12.00-18. of Flights 4 3 2 1 0 10.06.00-12.00-20.2008 .59 8.00-2.59 4.00-4.00-6.59 14.59 14.59 00.59 No.00-20.00-12.Competition Issues in the Air Transport Sector in India Figure S29: Slot Distribution – New Delhi to Bangalore New Delhi to Bangalore (02.

00-2.00-18.00-10.59 4.59 22.00-22.59 16.00-6.59 14.2008 .59 18.00-16.00-6.00-22.59 8.00-10.00-16.06.00-2.00-20.59 22.59 12.00-8.06.Monday) 5 4 3 2 1 0 10.59 6.59 8.59 20.59 00.59 18.59 No.00-4.59 16.00-12.00-4.59 14. of Flights Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 66 .Monday) 6 5 4 3 2 1 0 10.59 No.00-18.59 6.59 4.00-20.00-14.00-8.59 20.59 00.Competition Issues in the Air Transport Sector in India Figure S31: Slot Distribution – New Delhi to Mumbai New Delhi to Mumbai (02.00-12.00-14. of Flights Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S32: Slot Distribution – Chennai to New Delhi Chennai to New Delhi (02.2008 .59 12.

of Flights Time Slots ____________________________________________________asci research and consultancy 67 .00-2.00-2.00-20.00-10.00-6.00-20.Saturday) 4 3 2 1 0 10.06.00-22.00-14.Competition Issues in the Air Transport Sector in India Figure S33: Slot Distribution – Chennai to Mumbai Chennai to Mumbai (02.04.59 8.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines No.59 20.59 6.00-16.2008 .00-12.59 4.59 18.00-4.59 14.59 12.59 8.59 14.59 16.59 22.59 16.00-12.59 4.00-22.00-8.59 00.2008 .00-8.00-4.59 18.59 20.00-18.59 00.59 Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S34: Slot Distribution – Chennai to Kolkata Chennai to Kolkata (05. of Flights Air India 3 2 1 0 10.Monday) 4 No.00-18.59 22.00-16.59 6.59 12.00-6.00-10.00-14.

00-12.00-16.00-2.00-6.Monday) No.06.59 6.00-14.59 16.00-4.00-18.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 68 .00-8.59 8. of Flights Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S36: Slot Distribution – Chennai to Bangalore Chennai to Bangalore (02.00-4.59 20.00-20. of Flights 4 3 2 1 0 10.00-14.59 16.59 18.59 14.00-10.59 22.00-20.2008 .59 22.59 8.59 14.59 4.59 00.00-8.00-16.59 No.Competition Issues in the Air Transport Sector in India Figure S35: Slot Distribution – Chennai to Hyderabad Chennai to Hyderabad (02.00-6.06.00-22.Monday) 3 2 1 0 10.00-10.00-2.59 20.59 4.59 00.59 18.59 12.2008 .00-12.00-22.59 6.00-18.59 12.

00-4.59 18.00-18.59 8.00-20.00-14. of Flights 4 3 2 1 0 10.00-12.00-4.59 20.59 22.59 18.59 4.00-12.59 20.59 14.06.59 22.59 16.00-10.00-16.00-16.00-2.59 14.59 12.59 12.00-6.06.59 6.00-6.Competition Issues in the Air Transport Sector in India Figure S37: Slot Distribution – Kolkata to New Delhi Kolkata to New Delhi (02.00-20.00-2.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines No.00-14.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 69 .59 8.00-22.2008 .59 6. of Flights Time Slots Figure S38: Slot Distribution – Kolkata to Mumbai Kolkata to Mumbai (02.00-8.Monday) No.00-8.00-10.59 16.2008 .00-18.Monday) 3 2 1 0 10.59 4.00-22.59 00.59 00.

00-14.00-12.59 18.00-2.59 16.00-6.2008 .00-6.59 4.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines No.00-8.59 8.00-4.Monday) 3 2 1 0 10.2008 .59 00.00-8.59 6.00-4.59 22.00-18.Competition Issues in the Air Transport Sector in India Figure S39: Slot Distribution – Kolkata to Hyderabad Kolkata to Hyderabad (02.59 8.06.00-16.00-12.00-18.59 4.59 14.59 16.59 14.59 6.59 20.59 18. of Flights Time Slots ____________________________________________________asci research and consultancy 70 .59 20.59 12.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines No.00-14.00-22.06.59 00.00-2.00-10.59 22.00-20.00-20.00-16.00-22.00-10.Monday) 2 1 0 10. of Flights Time Slots Figure S40: Slot Distribution – Kolkata to Chennai Kolkata to Chennai (02.59 12.

59 22.59 16.59 22.00-22.59 8.59 00.00-8.59 20. of Flights 2 1 0 10.59 4.2008 .59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S42: Slot Distribution – Bangalore to New Delhi Bangalore to New Delhi (02.00-22.00-20.00-6.00-16.00-12.00-10.59 No.00-8.59 6.00-4.59 6.59 8.00-6.00-18.59 12.00-12. of Flights Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 71 .00-2.2008 .00-14.00-4.00-16.59 20.59 18.00-2.59 14.59 4.59 00.00-18.Competition Issues in the Air Transport Sector in India Figure S41: Slot Distribution – Kolkata to Bangalore Kolkata to Bangalore (02.Monday) 5 4 3 2 1 0 10.06.59 14.00-20.59 12.59 18.06.00-10.00-14.Monday) 3 No.59 16.

00-6.59 16.00-8.59 12.00-2.59 00.00-18.Monday) No.59 14.59 20.59 18.00-4.59 8. of Flights 3 2 1 0 10.00-12.00-6.00-20.00-10.59 6.00-10.59 18.59 22.2008 .59 12.59 4.59 16.59 Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots Figure S44: Slot Distribution – Bangalore to Hyderabad Bangalore to Hyderabad (02.00-20.00-18.59 6.00-16. of Flights 4 3 2 1 0 10.59 00.00-14.00-22.00-2.00-12.00-4.59 20.00-16.00-8.59 4.00-14.Monday) 4 No.59 22.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 72 .59 8.00-22.06.Competition Issues in the Air Transport Sector in India Figure S43: Slot Distribution – Bangalore to Chennai Bangalore to Chennai (02.59 14.2008 .06.

00-22.59 14.00-6.00-18.Monday) 4 No.00-16.00-6.06.00-10.00-8.00-12.59 8.00-20. of Flights Air India Indian Deccan Go Air IndiGo Jet Airways Jetlite SpiceJet Kingfisher Airlines Time Slots ____________________________________________________asci research and consultancy 73 .59 16.00-4.Competition Issues in the Air Transport Sector in India Figure S45: Slot Distribution – Bangalore to Kolkata Bangalore to Kolkata (02.00-2.59 20.00-4.59 4.06.59 8.59 12.00-16.00-8.59 4.00-2.59 14.Monday) 5 4 3 2 1 0 10.59 Air India Indian Deccan Go Air IndiGo Jet Airw ays Jetlite SpiceJet Kingfisher Airlines Figure S46: Slot Distribution – Bangalore to Mumbai Bangalore to Mumbai (02.00-10.59 16.59 18.00-12.59 6.00-18.59 18.00-14.59 No.59 00.59 22.00-14.59 22.00-22.59 20.59 12.59 00. of Flights 3 2 1 0 10.2008 .2008 .59 6.00-20.

Competition Issues in the Air Transport Sector in India Figure P1: Passenger Traffic during 2006-07 Monthly Passenger Traffic .486.422.382 Hyderabad 2.173.620.473.041 4.220.359.590.2006-07 1.003.771 1.307.934 1.701 r O ct ob er N ov em be r D ec em be r pt em be Ja nu a ru ar y Ju ly Ju ne Ap gu st Au Figure P2: Passenger Traffic at 6 Metros during 2006-07 Passenger Traffic at Airports .248 1.407.182 Bangalore ____________________________________________________asci research and consultancy 74 2.479 M ay 1.2006-07 Se 4.446.330.649 1.033.562 M ar ch ry ril 1.498 1.420.281 New Delhi Mumbai Chennai Kolkata 2.747.703 .804 1.364.766 1.028 Fe b 2.295.042 1.980 1.

6% 4.000 Passenmher Traffic ('000) Passenger Share for all 9 Aircarriers from 6 Metro Airports .243 15.4% 0.0% 16.9% 401 ay s .8% 11.4% 10.6% 585 9.5% 13.4% 0% In di an Je tA i rw In di a Ai r 25.4% 1.3% 0 365 2.0% 5.2006-07 3.5% 20.0% Je tli te Ai r Ki ng fi s he r Sp ic e D Passenger Volume G o Passenger Percent Share Figure P4: Passenger Share at Hyderabad 600 500 Passenmher Traffic ('000) Passenger Share for all 9 Aircarriers from Hyderabad .0% 2.5% 400 300 411 330 200 209 158 92 85 0 In di G o te In di an Ai r ec ca n Ki ng fi s he r Je tli Sp ic e Je tA i rw G Passenger Volume Passenger Percent Share ____________________________________________________asci research and consultancy 75 Ai r D In di a Je t o ay s 48 100 4.696 6.0% 10.718 40% 27.225 2.000 2.1% In di G o ec ca n Je t 3.9% 3.2006-07 20.3% 268 7.Competition Issues in the Air Transport Sector in India Figure P3: Passenger Share at 6 Metro Airports 4.0% 20.626 3.5% 1.039 18.0% 15.9% 623 7.

0% Passenmher Traffic ('000) 1.1% 337 116 183 445 2.390 829 295 300 529 638 845 986 10.5% 10.000 12.Competition Issues in the Air Transport Sector in India Figure P5: Passenger Share at New Delhi 1.0% 20.2006-07 35.8% 0 141 In di an Je tA i rw Ai r In di a ay s 31.4% from New Delhi .0% 30.5% 18 0 In di G o Je tli te ec ca n Je t Sp ic e 0.4% 4.0% 3.3% 25.0% 25.5% 600 8.0% 6.7% 5.0% 15.8% 1.8% 5.0% 15.200 900 12.0% 5.0% 10.0% In di G o Je tli te Passenger Volume Figure P6: Passenger Share at Mumbai 2.2006-07 20.3% 0.500 1.0% 20.4% In di an Ai r Ki ng fi s he r In di a Ai r o ay s Passenger Volume Passenger Percent Share ____________________________________________________asci research and consultancy 76 Je tA i rw D G .2% 566 7.0% 0.0% Passenmher Traffic ('000) Passenger Share for all 9 Aircarriers 23.0% 4.0% 15.000 Ai r Ki ng fi s he r ec ca n Je t Sp ic e D G o Passenger Percent Share Passenger Share for all 9 Aircarriers from Mumbai .5% 18.5% 500 333 553 239 186 12.500 1.

0% 25.3% 465 713 Passenger Share for all 9 Aircarriers from Kolkata .0% 20.9% 0 In di G o Je tli te ec ca n Je t Ai r Sp ic e o 0.3% 0.9% In di an Ki ng fi s he r In di a Ai r ay s 0.3% 169 219 4.3% 10.1% 6.0% 5.2006-07 20.9% 137 7.0% 16.3% 0.0% 5.9% 599 15.0% 10.000 Ai r D In di a Je t o ay s 50 3.0% 6 8.0% Passenmher Traffic ('000) 435 155 80 57 84 3.0% Je tA i rw D Passenger Volume G Passenger Percent Share ____________________________________________________asci research and consultancy 77 .0% 2.0% 15.0% 30.000 900 800 700 600 500 400 300 200 100 0 Passenger Share for all 9 Aircarriers from Chennai .0% Passenmher Traffic ('000) 500 10.6% In di G o Je tli te Ai r Ki ng fi s he r In di an ec ca n Sp ic e Je tA i rw G Passenger Volume Passenger Percent Share Figure P8: Passenger Share at Kolkata 1.8% 35.8% 372 18.0% 10.4% 30.4% 32.7% 2.0% 29.Competition Issues in the Air Transport Sector in India Figure P7: Passenger Share at Chennai 1.2006-07 35.0% 21.2% 207 344 99 18 20.0% 25.

7% 15.000 30.1% In di an Ai r Ki ng fi s he r Je tA i rw G Passenger Volume Passenger Percent Share Figure P10: Slot Allocation and Passenger Share at 6 Metros 40% 7% 9.1% 194 29 85 416 3.9% 20% 23% 27.4% Passenmher Traffic ('000) 15.6% 11.5% 9% 7.0% 28.0% 20.0% 0 In di G o Je tli te ec ca n Je t Sp ic e 1.2006-07 Ai r D In di a o ay s 0% Ai r o ia n he r tlit ay s an Je iG ec c G o In d In d Ki ng fis Sp ice tA irw Je Slot Allocation Share Passenger Volume Share ____________________________________________________asci research and consultancy 78 Je Ai r D In d ia e t 1% 3.3% 9% 11% 4% 3.8% 15.9% 15% 18.0% 25.0% 43 7.0% 1.4% 2.0% 10.0% 431 468 302 Passenger Share for all 9 Aircarriers from Bangalore .1% 5.2006-07 17.1% .1% 781 15.6% 0.0% 500 11. Passengers Carried 6 Metros .Competition Issues in the Air Transport Sector in India Figure P9: Passenger Share at Bangalore 1.4% Percent Slots Allotted vs.

5% 10% 8.0% 20% 12.3% 13.4% .0% 20% 23. Passengers Carried New Delhi .0% 9% 6% 4. Passengers Carried Hyderabad .5% 15% 16.2006-07 24% 20.1% 17% 20.5% 10% 13% 4.Competition Issues in the Air Transport Sector in India Figure P11: Slot Allocation and Passenger Share at Hyderabad 40% Percent Slots Allotted vs.8% 4% Passenger Volume Share ____________________________________________________asci research and consultancy 79 In di a Je t o ay s 1% 2.6% 5% 4.5% 17% 20.5% 12% Ai r Ai r In di a 2% 3.3% D 0% In di G o Je tli te ec ca n Ki ng fi s he r In di an Je t Ai r Sp ic e o Je tA i rw ay s D Slot Allocation Share G 2.9% 9% 10.4% 0% In di G o Je tli te In di an Ai r ec ca n Ki ng fi s he r Sp ic e Je tA i rw G Slot Allocation Share Passenger Volume Share Figure P12: Slot Allocation and Passenger Share at New Delhi 40% Percent Slots Allotted vs.2006-07 15.4% 6% 7.3% 10.

8% 16% 18.5% 12.3% In di a Je t o ay s 1% 6. Passengers Carried Mumbai .Competition Issues in the Air Transport Sector in India Figure P13: Slot Allocation and Passenger Share at Mumbai Percent Slots Allotted vs.0% 20% 27% 32.6% 6.5% 26% 31.5% 40% 0.2% 8% 5.4% 20.4% 9% 4.9% 4% 3.4% 0% In di G o Je tli te In di an Ai r ec ca n Ki ng fi s he r Sp ic e Je tA i rw G Slot Allocation Share Passenger Volume Share Figure P14: Slot Allocation and Passenger Share at Chennai 45% 14% 7% 7. Passengers Carried Chennai .8% 7% 7.7% 7% 8% .8% Percent Slots Allotted vs.7% 2.1% 11% 0% 3.2006-07 18% 12.3% 16% 21.2006-07 Ai r Ai r In di a D 0% In di G o Je tli te ec ca n Ki ng fi s he r In di an Je t Ai r Sp ic e o Slot Allocation Share Passenger Volume Share ____________________________________________________asci research and consultancy 80 Je tA i rw D G ay s 1% 2.

9% 6% 0% 0.8% 13% 16. Passengers Carried Kolkata .2006-07 0% In di G o Je tli te In di an Ai r ec ca n Ki ng fi s he r Sp ic e Je tA i rw G Slot Allocation Share Passenger Volume Share Figure P16: Slot Allocation and Passenger Share at Bangalore 40% Percent Slots Allotted vs.0% 7% 9% 7. Passengers Carried Bangalore .2% 10.3% 10% 4.9% 17% 10.4% 28.7% 11% 15.1% 23% 11.6% D 0% In di G o Je tli te ec ca n Ki ng fi s he r In di an Je t Ai r Sp ic e o Je tA i rw ay s D Slot Allocation Share G 1.1% Passenger Volume Share ____________________________________________________asci research and consultancy 81 In di a Je t o ay s 0% 0.3% .1% Ai r Ai r In di a 1% 1.9% 17% 25% 29.4% Percent Slots Allotted vs.2006-07 24% 17.3% 12% 8.0% 13% 15.1% 11% 2% 3.Competition Issues in the Air Transport Sector in India Figure P15: Slot Allocation and Passenger Share at Kolkata 40% 18.

0% -12.0% 6 Metros -11.0% -2.0% -3.0% -10.4% -6.2% Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share -6.0% -6.2% -1.0% -2.5% -8.0% 6 Metros Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share Kolkata Bangalore -4.4% 0.5% -2.0% -2.9% -6.2% -4.0% -0.8% -4.0% Figure P18: Slot Share Advantage – Deccan Deccan: Slot Share Advantage over Passenger Carried 0.0% -8.Competition Issues in the Air Transport Sector in India Figure P17: Slot Share Advantage – Jetlite 2.9% -5.8% -6.7% -5.7% Kolkata Bangalore ____________________________________________________asci research and consultancy 82 .0% Jetlite: Slot Share Advantage over Passenger Carried 0.

0% 1.2% 2.4% -2.0% 0.0% 0.9% -4.1% IndiGo: Slot Share Advantage over Passenger Carried 12.0% -0.0% 2.0% 8.0% 12.0% 10.4% 1.0% 6 Metros Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share Kolkata Bangalore ____________________________________________________asci research and consultancy 83 .5% 9.4% 8.0% -1.2% 7.0% 4.5% 8.5% 2.0% 6 Metros Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share Kolkata Bangalore Figure P20: Slot Share Advantage – IndiGo 14.0% 9.Competition Issues in the Air Transport Sector in India Figure P19: Slot Share Advantage – Spicejet Spice Jet: Slot Share Advantage over Passenger Carried 3.0% 6.2% 2.6% 4.8% 9.

0% 8.3% 1.6% -0.9% 2.9% -1.0% -4.0% 12.0% -2.0% 4.0% 6.9% 6 Metros Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share Kolkata Bangalore Figure P22: Slot Share Advantage – Kingfisher 16.0% 14.8% 0.6% 9.0% -6.0% 0.0% 8.0% 2.0% 0.0% 7.0% 0.0% 4.0% Go Air: Slot Share Advantage over Passenger Carried 4.9% 7.1% 4.0% 6 Metros Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share Kolkata Bangalore ____________________________________________________asci research and consultancy 84 .0% 10.Competition Issues in the Air Transport Sector in India Figure P21: Slot Share Advantage – Go Air 6.2% -3.0% 11.0% Kingfisher: Slot Share Advantage over Passenger Carried 14.

0% -8.0% ba i i Ko lk at a el hi yd er ab ad M et ro s he nn a H Slots Share MINUS Passenger Share ____________________________________________________asci research and consultancy N 85 Ba ng al or ew M um D 6 C e .4% -3.9% -4.2% -5.0% -4.4% -4.9% -2.3% -6.8% -4.5% -3.Competition Issues in the Air Transport Sector in India Figure P23: Slot Share Advantage – Indian 0.0% Jet Airways: Slot Share Advantage over Passenger Carried -2.0% 6 Metros Hyderabad New Delhi Mumbai Chennai Slots Share MINUS Passenger Share Kolkata Bangalore Figure P24: Slot Share Advantage – Jet Airways 0.8% -5.3% -5.0% -8.0% -2.6% -6.4% -5.0% -3.9% -5.0% Indian: Slot Share Advantage over Passenger Carried -2.0% -2.0% -4.

0% -0.6% -2.0% -2.9% -0.3% -1.0% -1.Competition Issues in the Air Transport Sector in India Figure P25: Slot Share Advantage – Air India 0.2% -6.0% Air India: Slot Share Advantage over Passenger Carried -0.3% ba i i Ko lk at a he nn a Ba ng al or e ew 6 H Slots Share MINUS Passenger Share ____________________________________________________asci research and consultancy N 86 C .0% el hi yd er ab ad M et ro s M um D -5.0% -4.

Competition Issues in the Air Transport Sector in India Figure U1: Slots per Million Passengers – 6 Metros Slots PER Million Passengers .Hyderabad 150 100 50 32 33 24 119 47 74 29 35 Ai r 0 di an Je tA irw ay s Je tl i te ec ca n Sp ic e G o In is h Ki ng f In ____________________________________________________asci research and consultancy 87 Ai r D In di a di go Je t Ai r er 21 In d ia 14 .6 Metro Airports 200 150 100 41 42 58 178 24 19 50 0 27 29 di go di an Je tli te is he r ay s Je t Ai r n D ec ca G o Je tA irw Sp ic e In Ki ng f In Figure U2: Slots per Million Passengers – Hyderabad Slots PER Million Passengers .

Mumbai 112 38 24 Je tA i rw 0 Jetlite Deccan Spice Jet Go Air 16 Kingfisher 23 Indian 28 20 Jet Airways 30 ____________________________________________________asci research and consultancy 88 Ai rI nd ia Air India fis he r di ec o In G ng D In di ay 21 8 .Competition Issues in the Air Transport Sector in India Figure U3: Slots per Million Passengers – New Delhi Slots PER Million Passengers .New Delhi 150 100 50 39 44 21 129 56 26 26 0 te tli Je ca n Je t Ai r go an s Sp ic e Ki Figure U4: Slots per Million Passengers – Mumbai 120 100 80 60 40 36 Slots PER Million Passengers .

Chennai 121 63 32 52 24 22 26 s t 32 Ai r er ca n Je an ay ic e G ng f Je tA D Sp Figure U6: Slots per Million Passengers – Kolkata 400 350 300 250 200 150 100 50 0 tli te Je Slots PER Million Passengers .Competition Issues in the Air Transport Sector in India Figure U5: Slots per Million Passengers – Chennai 140 120 100 80 60 40 20 0 Je tli te Slots PER Million Passengers .Kolkata 347 55 21 18 24 20 Ki s t 25 0 Ai r he r di an Je ec ca irw ay ic e fis o Ki ng Sp ____________________________________________________asci research and consultancy 89 Je tA Ai rI D G In nd ia n Ai rI nd is h di ec In irw o ia .

Competition Issues in the Air Transport Sector in India Figure U7: Slots per Million Passengers – Bangalore 200 Slots PER Million Passengers .Bangalore 100 50 33 32 26 0 Je tli te ca n Je t ec Sp ic e 12 an 26 38 he r Ai ay In di is Ai rw o G Ki ng f D ____________________________________________________asci research and consultancy 90 Je t Ai rI nd ia s r 139 .

Moreover. It is always difficult to detect a cartel.1%).000 kgs. Hence. the simpler it is to coordinate actions. markets with the following characteristics are more likely to support the successful operation of a cartel. b) Barriers to Entry Barriers to entry are important to the successful operation of a cartel. however. The barriers to entry in this sector have been discussed elsewhere. if we look at the market shares of airlines notice that after the merger of Jet and Sahara.000 kgs and Rs. The possibility for non-price competition through product differentiation is. after the mergers has only 9 operators. The airline industry in India.Competition Issues in the Air Transport Sector in India VIII. the market is dominated by Jet and Jet Lite (30%). the legal provisions in these countries and the issues emerging in terms of competition policy there from. which had 12 scheduled operators.10 crores for aircraft of all-up-weight below 40. The greater the anticipated rewards the more likely they are to outweigh the risks of detection. Theoretically. Kingfisher and Deccan (29. However. the easier it is to detect cheating and the easier is to keep the arrangement secret. Issues relating to cartels. or controlling the market. Cartels operate in secrecy.30 crores for aircraft of all up weight exceeding 40. The service in the airline industry is of two types a) Full Cost Carriers providing meals etc. Kingfisher and Deccan and Air India and Indian. b) Slots: Grandfathering of slot rights poses a barrier to entry for a new player. an increase in price will attract new competitors into the market. In the absence of barriers. of course. the cheaper the costs of collusion. c) Homogeneous Goods It is easier for firms to collude where products are similar and where the main dimension of competition is price competition (competition is not multidimensional). In this context. There is currently no policy for allocation of slots to new players in the industry. on board – Therefore have a higher price ____________________________________________________asci research and consultancy 91 . larger the market share that each undertaking has the greater the potential profits to be earned from successful collusion (the bigger the share that each will receive of the collusive pie!). Further. we were given to understand that when a new slot is available the new player is given preference as far as possible. cases of cartels in countries like the US and the UK will be studied to examine the type of offences. a) Fewer Firms and Higher Market Concentration The fewer the number of operators on the market. Oligopolistic markets are therefore particularly prone to cartelization. reduced. the minimum fleet size for a scheduled operator is five (5) aircrafts and the minimum amount of the shareholders funds is Rs. Draw necessary comparisons wherever relevant in the Indian context. Where goods are homogeneous the costs of collusion are reduced and the likelihood of successful collusion increased. in this section we first examine theoretically the conditions that favor cartelization and compare with the current scenario in the air transport industry in India. the major barriers to entry are: a) High capital requirements: According to the domestic air transport policy.

Therefore this slowing demand may be a catalyst for collusive agreements. We discuss the scope of the alliance below & its potential impact on competition. where costs are not similar. while the growth of this sector in 2007 was around 30 percent. In view of the large losses Jet Airways and Kingfisher Airlines announced a strategic alliance in October 2008. Alliance between Jet and Kingfisher Jet and Kingfisher suffered losses in the last financial year. We do not have any data on cost structures and operating efficiencies. Also. the cumulative losses are expected to be around Rs. for example. Kingfisher Airlines made a loss of over Rs 1. of the airlines and hence it is difficult to comment. if we look at the losses of this industry. ____________________________________________________asci research and consultancy 92 . any cartel arrangement. the easier it will be for firms to monitor what their competitors are doing and to detect cheating on. the homogeneity of ownership may make collusion easier. e) Market Transparency The more transparent the market.Competition Issues in the Air Transport Sector in India b) Low Cost carriers which do not provide the meals. Therefore the possibility of collusion is between segments providing the same type of services. In August 2008. Cartels can be of different types namely for price fixing. the increase in surcharges and taxes has meant the demand for air travel has slowed. Therefore. all players in the industry have been forced to increase price of tickets. or deviation from. the growth for the first few months of 2008 has been lower than 20 percent. d) Firms with Similar Cost Structures or Operating Efficiencies and Market Shares The more similar cost structures. Hence for him the service offered by the two categories are not homogenous and he is willing to pay a higher price for a better service.000 crore and Jet Airways Rs 806 crore in 2007-8. This reinforces the fact that collusion or cartelization is easy in this market. 700 billion.cheaper flight tickets For a business traveler. With the increasing prices of ATF. Also. the time of flight and quality of service – timeliness is more important. hence any under-cutting is easy to detect. f) Depressed Conditions or Low Innovation Rate Firms operating in industries in recession or suffering from declining demand may be tempted to adopt price-fixing or other collusive agreements to maintain profits. the easier it is for the firms to cooperate on prices to be charged. notice that the two dominant players in the market – Jet and Kingfisher – both have a stake in low cost airline also. The stated objective of the alliance was to help them reduce cost and enhance efficiency. market sharing or limiting supply. Jet & Kingfisher announced a strategic alliance. Interestingly. lower cost firms are likely to want lower prices than other cartel members. All players in the market can monitor the price of the ticket on offer. According to data released by CAPA.

Jet Airways after the merger with Air Sahara now controls around 31% of the total and Kingfisher and Deccan together hold around 28%.Competition Issues in the Air Transport Sector in India The Scope of the alliance included the following areas: • • • • • • • • Code-shares on both domestic and international flights subject to DGCA approval. Joint Network rationalization and synergies. So if we look at the share of total passengers post merger. in 2007 three mergers happened in the Indian Air Transport Sector. As already stated. the alliance may result in cartelization / monopoly. The provisions of Competition Act which define an anticompetitive agreement as an agreement having appreciable adverse effect on competition and includes:• agreement to limit production and supply • agreement to allocate markets • agreement to fix price • bid rigging or collusive bidding • conditional purchase/sale (tie-in arrangement) • exclusive supply/distribution arrangement • resale price maintenance • refusal to deal If we look at the scope of the alliance. Joint fuel management to reduce fuel expenses. cross selling of flight inventories using the common Global Distribution system platform and Code-shares on both domestic and international flights subject to DGCA approval is an exclusive supply/distribution arrangement that may have an appreciable adverse impact on competion. Similarly. Moreover. Under the joint business agreement. Cross selling of flight inventories using the common Global Distribution system platform. subject to DGCA approval. However. in August 2008 British Airways & American Airways attempted to obtain immunity from US Antitrust laws for a proposed alliance for services between London & USA. Common ground handling of the highest quality. Any alliance between players in an oligopolistic market should come under the purview of the Competition Authority. Therefore they can be potentially serious obstacles to effective competition. Reciprocity in Jet Privilege and King Club frequent flier programmes The alliance did not become operational due to various reasons. since there was an attempt at an alliance we discuss below how it can impede competition. Cross utilization of crew on similar aircraft types and commonality of training as also of the technical resources. the three airlines would cooperate commercially on flights between the United States. If the alliance came through. Mexico and Canada. joint network rationalization amounts to agreement to limit production and supply and agreement to allocate markets. Internationally. Interline/Special Prorate agreements to leverage the joint network deploying 189 aircraft offering 927 domestic and 82 international flights daily. one aim of such schemes and programmes is to influence the behaviour of travellers in such a way that they become more inclined to seek a specific airline’s products and services. essentially 60 percent of the total passengers would have been affected. The alliance would have covered at least 800 flights operated every day by the two airlines. As regards the reciprocity of the frequent flier programmes. British Airways. and the ____________________________________________________asci research and consultancy 93 . American Airlines and Spain's Iberia announced an alliance that would allow the three carriers to agree on fares and schedules.

because even with slots.000 slots a year at London Heathrow. Under these contracts. DallasLondon and Chicago-London. DOJ considered factors such as entry barriers to evaluate the likelihood that high concentration will lead to increased market power in the particular circumstances of the markets at issue.000. and even higher shares of the business travelers. Miami. The two airlines had tried twice before (in 1997 and 2001) to gain permission from the OFT and EC to bring together their operations and. DOJ stated in its report that American and British Airways currently compete head-to-head. That service would replace the service American currently offers in those two markets. other airlines would be unlikely to enter. In deciding whether or not the alliance should be approved. BA and AA hold 49% of peak time arrival slots at Heathrow. The loss of this competition would be in some of the largest and most lucrative business travel markets in the world. the Department of Justice (DOJ) identified the relevant markets in which the firms compete. with AA holding 3% and Iberia holding 2%. To remedy the harm in two of the markets. ____________________________________________________asci research and consultancy 94 . as well as substantial new air service from other U. According to the DOJ. Slot dominance • • • • • Heathrow is full. New York. AA and Iberia again applied for anti-trust immunity. offering nonstop service to London from Boston.” In August 2008 when the BA. BA holds 42% of slots at Heathrow. The Department also concluded that making slots available would not remedy the loss of competition in two city pairs where American and British Airways would have hubs at both ends. The Department also said that the combination would eliminate the two airlines’ current competition for contracts with corporations. Virgin Atlantic has 17. cities. identified the firms that compete in those markets. No other carrier can replicate BA/AA’s network. and measured concentration. Their combination would give them well over 50 percent of the flights in most of these markets. an airline offers discounts in return for a corporation’s commitment on travel. Switzerland and Norway while continuing to operate as separate legal entities. on both occasions.Competition Issues in the Air Transport Sector in India European Union. the scarcity of slots at Heathrow makes entry by other airlines into most of these markets unlikely. Thus the Department of Justice stated that “the alliance threatens a substantial loss of competition which would likely result in higher air fares and reduced service. They would expand their codeshare arrangements on flights within and beyond the EU and US. many researchers noted that nothing had changed since the last application for anti-trust immunity and therefore opposed the alliance on the following grounds. Chicago. Unless Department of Transportation requires divestiture of enough slots for new entrants to offer nine daily round trips to London from New York and Boston. As a result the Department recommended that DOT withhold immunity for joint pricing and related activities in those markets.S. giving them a further advantage with time-sensitive and corporate travellers. New York-Heathrow and BostonHeathrow. every regulator that examined the alliance raised serious concerns about the anti-competitive nature of the proposal. the Department recommended that Department of Transportation require the divestiture of slots and related facilities sufficient to ensure that new entrants operate seven daily round trips from New York and two from Boston. Dallas and Los Angeles. Collectively they would hold 46% compared to Virgin Atlantic’s 3% holding. the DOJ would oppose the transaction. BA and AA have over 200.

Virgin Atlantic Airways Ltd. according to the US Department of Transport. Asia. Based on the association of three factors (the price parallelism. 2. This feature of the ATPCO system had earlier been attacked by the U. the investigation showed that the companies had a very efficient tool for coordinating their prices. Since the cartel cases are difficult to detect. the computerised airline price data system maintained by the Airline Tariff Publishing Company. A company could configure a price change notice so that. They are summarized below: 1. for an initial three-day period. Virgin has a smaller base at Manchester Airport. “Investigation concluded that the price move was not merely a case of conscious parallelism. the prices of the plane ticket for the Rio de Janeiro. It should also be noted that CADE. which are located in London. which was the ATPCO system. British Airways and Virgin Atlantic British Airways.Competition Issues in the Air Transport Sector in India Market share dominance • • • • In 2007 62% of passengers travelling between Heathrow and the US travelled on BA or AA. the chairmen’s meeting and the tool for coordinating prices). The former is the principle and ____________________________________________________asci research and consultancy 95 . and Australia from its main bases at London Heathrow and London Gatwick. (operating as Virgin Atlantic) was founded in 1984. On Heathrow-US routes. made a point of justifying why the “price leadership” theory could not be applied in the case. In September 2004. The posting company was thus able to abort the change if competitors failed to follow suit. Each carrier was fined 1% of the revenue earned on the affected route during 1999 and was enjoined from fixing prices and from posting price adjustments in advance”. BA has 40% of capacity and AA has 17% . evidence revealed that price data were exchanged among the companies through postings on ATPCO. Its main hubs are London Heathrow and London Gatwick. CADE decided that there was a strong indication that the firms were colluding to fix prices. the Caribbean. It operates long-haul routes between the United Kingdom and North America. Now based at London’s Gatwick and Heathrow airports and Manchester airport. in its decision to punish the firms. Department of Justice. it operates long haul services to thirty destinations world-wide. is the national airline and flag carrier of the United Kingdom and one of the largest in Europe. Virgin Atlantic Airways has become Britain’s second largest carrier serving the world’s major cities. we studied international cases on cartelization in this industry. It is owned by Richard Branson's Virgin Group (51%) and Singapore Airlines (49%). BA/AA alliance will creates a monopoly on the Heathrow – Dallas Fort Worth route. A BA/AA alliance would have a dominant market share on a number of Heathrow – US routes.together they represent 57% of Heathrow-US capacity. England. but system modifications arising from that case had been implemented only in North America.São Paulo route had simultaneously increased by 10%. In addition to the meeting of the companies’ executives. the change could be viewed only by other airline companies and not by consumers or travel agents. Brazil: The Rio de Janeiro – São Paulo Airline Case This case was initiated after some of the major newspapers in the country reported that the presidents of Brazil’s four major airlines had met at a hotel and five days later. formed in 1974. Notice that the main hubs of both British Airways and Virgin Atlantic are London Heathrow Airport and London Gatwick Airport. The operations of BA runs to 147 destinations in 75 countries.S. Africa. the Middle East. Apart from the chairmen’s meeting. (Administrative Council for Economic Defense (CADE) determined that the four airlines had colluded to raise prices.

The table VIII. The EC carried out “unannounced inspections” at various premises as it had “reason to believe the companies concerned may have violated Article 81 EC-Treaty. These two destinations are common to both the airlines and it helped in uniting and clubbing their activities illegally. ____________________________________________________asci research and consultancy 96 . Senior officials BA were identified. and the airline escaped a fine in return for “whistle-blowing”.1 below shows the price fluctuations on fuel surcharges. the most of the activities and operations are common.Competition Issues in the Air Transport Sector in India biggest airport serving the United Kingdom and handles more international passenger traffic than any other airport in the world. Gatwick Airport is the second busiest airport in the United Kingdom after Heathrow. This was found out by the joint investigation of Office Of Fair Trade And America’s Department of Justice into “alleged cartel activity” on long-haul passenger flights. and just one reduction. On detection it was found out that a British Airways official called a counterpart at Virgin Atlantic for the discussion over the fuel surcharges.haul flights which it maintains has been to counter the rising price of oil. European Commission officials raided British Airways over alleged price fixing on 10th October 2007. BA had introduced eleven price rises. The main finding in the above regard was that since May 2004. The deal-cartel The deal between British airways and Virgin atlantic was a cartel-an illegal operation of raising prices on fuel surcharges on long haul fights over the phone. to be involved in the cartel formation with VA. How was the cartel detected? The OFT started its probe after Virgin Atlantic employees came forward with information about the price-fixing. Likewise. on long. which prohibits practices such as price fixing”.

In February. Cartel detection The EC carried out “unannounced inspections” at various premises as it had “reason to believe the companies concerned may have violated Article 81 EC-Treaty.50 surcharge introduced Aug 11: long –haul surcharge increased to £6 per flight Oct 14: long. British Airways and Korean Airways were charged with fixing the rates charged to customers for international air shipments of cargo. It was found out that Korean Air ____________________________________________________asci research and consultancy 97 . The charges against the two airlines companies were filed on August 01. 3.telegraph.S. The department also charged that between August 2004 and February 2006. it was announced that people who flew long haul with British Airways or Virgin Atlantic between August 11. after Virgin and BA reached agreement on a class action suit in the US. found guilty of operating a cartel. British Airways and Korean airways Korean Air was founded by the South Korean Government in 1962 as Korean Air Lines to replace Korean National Airlines (founded in 1948). The case is still in the process and the hearing on the top officals of British Airways is yet to happen. electronics and medicines.haul surcharge increased to £10 2005 March 28: long-haul surcharge increased to £16 June 27: long-haul surcharge increased to £24 2004 May 19: Virgin announces £2. 2007 in the U. If.5 million by the OFT and $300 million by the US Department of Justice for colluding with Virgin on the level of fuel surcharges.1: Price Fluctuation On Fuel Surcharges BRITISH AIRWAYS VIRGIN ATLANTIC 2004 May 13: £2. clothing. Korean Air also maintains a domestic office campus at Gimpo International Airport in Seoul. It is among the top 20 airlines in the world airlines in terms of passengers carried. British Airways and Korean Air lines were involved in air cargo industry ship billions of dollars of consumer goods including produce. 2006 would be eligible for a refund. District Court for the District of Columbia. while its domestic division serves 20 destinations.50 surcharge Aug 9: announces surcharges increase to £6 Oct 8: surcharge rises to £10 2005 March 24: surcharge raised to £16 June 27: surcharge raised to £24 Sep 7: surcharge raised to £30 Nov 21: surcharge cut to £25 2006 Jan 9: surcharge raised to £30 March 22: Virgin announces increase to £35 2006 April 21: long-haul surcharge increased to £35 Source: www. which prohibits practices such as price fixing. Korean Air's main global headquarters campus and its Global Operations Center are located in Gangseo-gu in Seoul.uk PENALTY BA was fined £121.Its international passenger division and related subsidiary cargo division together serve 130 cities in 45 countries. Various ex-officials and current officials of BA were charged with offenses. the men may face as many as five years in prison. including shipments to and from the United States. Cartel The agreement was on fixing air cargo prices.co. 2004 and March 23.Competition Issues in the Air Transport Sector in India TableVIII.

conversations.Competition Issues in the Air Transport Sector in India and its competitors. conversations. and communications to monitor and enforce the agreedupon rates. British Airways’ fuel surcharge on shipments to and from the United States changed more than 20 times and increased from four cents per kilogram of cargo shipped to as high as 72 cents per kilogram. conversations. Penalty Both airlines agreed to plead guilty and pay separate $300 million criminal fines for their roles in conspiracies to fix the prices of passenger and cargo flights. • Agreeing. on certain components of the cargo rates on shipments to and from the United States and passenger fuel surcharges to levy for flights between the United States and the United Kingdom. Price fluctuation The Department noted that during the air cargo conspiracy. and • Engaging in meetings. Both British and Korean Airways were charged with carrying out the two price-fixing conspiracies with coconspirators by.British Airways agreed to increase the fuel surcharge over time from 10 cents per kilogram to as high as 60 cents per kilogram of cargo shipped from the respective destinations. during those meetings. and communications to discuss the cargo rates on shipments to and from the United States and passenger fuel surcharges to be charged for flights between the United States and the United Kingdom. and communications. ____________________________________________________asci research and consultancy 98 . among other methods: • Participating in meetings. • Levying cargo rates and passenger fuel surcharges in accordance with the agreements reached.

fuel supply. Whether grandfathering of slots has an impact on competition depends on how congested the airport is. enhancing competition between airports alone will not ensure full competition since the market power and capacity constraints can lead to a higher price of service. Thus the charges imposed by airports on aeronautical services such as for ground facilities. This policy usually accounts for a great majority of slots. The number of slots that can be allotted by an airport would depend upon its capacity. infrastructure and marketing require some permanency in the property rights allocated. baggage belts. This minimum decides the number of slots that will be allotted. ground safety services. Indian civil aviation sector has grown rapidly in the post liberalization scenario leading to a sharp increase in the volume of air traffic. this time is calculated based on when the aircraft arrives at or leaves the gate. unavoidable delays. The main economic argument in favour of grandfathering rights is that airlines wishing to make longer term investment decisions in aircrafts. large slot holdings have an impact on competition. cargo facilities. Similarly. etc affect airlines in a major way. For commercial operations which use airport gates. The two markets. Also. An important aspect of the interlinkage between airports and airlines is the issue of slot allocation. At an airport where the demand for slots is less than the available supply there should be no impact of grandfathering of slots. runway capacity is defined as the number of air traffic movements (ATMs. such as 16:45 to 17:00. Slots do have an element of property right attached in the sense it gives excusive right to use to the holder. As discussed earlier. Slot constraints can constrain competition. A second aspect of interlinkage between airports and airlines is in terms of airport charges. However.grandfathering of slots can provide a distinct advantage to the incumbent players in the market. if the demand is more than supply – making the airport slot constrained. namely the airport market and the airlines market are essentials interlinked. i. it arises out of the demand for air travel. ____________________________________________________asci research and consultancy 99 . there is a system of ‘grandfather rights’ which often governs slot allocation policy in a major way. In particular..e. if there is limited competition among the airlines. While terminal capacity is expressed in terms of a maximum hourly throughput of arriving and departing passengers. This is because if there is limited competition between airports enhancing competition among airlines alone will not ensure a competitive price for the consumers.Competition Issues in the Air Transport Sector in India IX. etc. runway. Side by side with this trend in the growth of air traffic. ie landings or take-offs of aircraft) which can take place during a given period. etc. crew. particularly at peak times. In fact the demand for airports is a derived demand. It gives the airline flexibility in scheduling and frequency. The OECD report on “Competition Policy and International Airport Services 1997” points out that the provision of air services between any two given cities requires two complementary inputs: aircrafts services and airports services. The ICAO defines an airport slot as the time that an aircraft is expected to arrive at or depart from a capacity constrained airport. ground handling services. Therefore there must be effective competition in both these markets if we want effective competition in the air transport sector. To Study the issue of Competition in Airports As discussed in the earlier sections. In general capacity of an airport is defined as the minimum of the parameters such as terminal capacity. The principle of grandfathering by giving permanency to the property right therefore provides a close substitute.. To take into account variations in flight times. airport slots may actually be allotted in terms of a time period. there has been a great deal of pressure on the available airport infrastructure. the need for upgrading airport infrastructure to keep pace with increasing air traffic has assumed a great deal of importance. Thus slots can act as a barrier to entry for new airlines and can be used by incumbent airlines to exclude new airlines from access to the airport.

operation and management of a greenfield airport at Devanahalli. the preferred route to upgradation of airport infrastructure has been through PPPs. Therefore at congested airports. and attains a dominant position. in July 2004 for the development. near Bangalore in the State of Karnataka. In India. The nature and extent of participation of the private sector in terms of ownership. the government has the following options: a) Expand the existing airport/ Build a new green field airport through concession or lease agreements b) Build a second airport for the same city Airport privatization has become an important policy option in this scenario. the Hyderabad International Airport and the Delhi and Mumbai Airports. From the perspective of this study. The BIAL was established with the participation of Karnataka State ____________________________________________________asci research and consultancy 100 . maintenance and other aspects in connection with developing the airport are governed through concession agreements between the Government of India and the private parties. where demand is greater than supply. control management. It is important to increase airport capacity given the pressure of demand for slots at existing airports. as below: A. Delhi and Mumbai airports and also the Draft Model Concession Agreement for PPP in non metro airports. how is it handled? If there are anticompetitive agreements based on concessions granted. including provision of subsidized land along with the airport land to attract private sector participation. For the purpose of our analysis we have looked at specific features of the Agreements that have a bearing on the Competition Issues involved. development and operations. maintenance. Instances of airports that have been built and improved through such PPPs are the Bangalore International Airport. Bangalore International Airport Limited A Concession Agreement was signed between the Government of India (GoI) and Bangalore International Airport Limited (BIAL) . operations. how is it handled? Are there litigations after award of concession? Has the government been monitoring implementation of concessions awarded? Once a private entity has got a concession. is it leveraging that to merge with another entity? Are there any anti competitive concerns of this sort. force majeure and termination and other miscellaneous provisions. HIAL. design. The Concession Agreements are detailed documents covering issues from the scope of the project. financial provisions. post grant of concession? Are private entities using the concession to attain dominant position? For assessing the competition issues involved in the airport sector. construction. if there is abuse of dominant position by concessionaire. we examine the competition issues involved in the grant of concessions to the private sector for upgradation of airport infrastructure. In particular we examine issues such as the following: • • • • • • In the process of grant of concession how is competition ensured? After grant of concession. financing. we have therefore analysed in some detail the concession agreements in the context of the BIAL. In India. completion. an important route through which the government is trying to attract the private sector in order to build/upgrade airports is that of public private partnerships (PPPs) wherein the Government of India has provided different types of incentives. A lucid account of the different models of providing airport infrastructure has been provided in Ohri( ).Competition Issues in the Air Transport Sector in India Given the linkages between airlines and airports it is clear that inter airport competition is important. keeping in mind the requirement of resources for this purpose.

Siemens Project Ventures GmbH. BIAL may. However the overall responsibility continues to remain with BIAL. at any time. • The operation and maintenance of the Airport and performance of the Airport Activities and Non-Airport Activities in accordance with the provisions of this Agreement.1 as above or which BIAL considers desirable or appropriate to be carried on or engaged in connection therewith (including any infrastructure service considered by BIAL to be reasonably necessary for the activities referred to above in Article 3. commissioning.1). baggage.3 The obligations of GoI GoI shall. banks and exchanges and shopping malls. and • The performance and fulfillment of all other obligations of BIAL in accordance with the provisions of this Agreement. at its own cost and expense. golf courses and other sports and/or entertainment facilities. GoI granted BIAL the exclusive right and privilege to carry out the development. passengers.1. comply with and perform all its obligations as set out in this Agreement and shall not instruct any statutory body under the direct control and direction of ____________________________________________________asci research and consultancy 101 . the Airports Authority of India. A. theme parks. restaurants. business centres. operation and management of the Airport (excluding the right to carry out the Reserved Activities and to provide communication and navigation surveillance/air traffic management services which are required to be provided by AAI).3 (the Concession Fee. amusement arcades.2.1) For the purpose of exercising the above rights under Article 3.1 Scope of the Project The Project encompasses: • The development and construction of the Airport on the Site in accordance with the provisions of this Agreement. undertake. (Article 3. design. maintenance. A. construction.). real estate. Flughafen Zuerich AG and Larsen & Toubro Limited.Competition Issues in the Air Transport Sector in India Industrial Investment and Development Corporation Limited. grant Service Provider Rights (including the right of the Service Provider Right Holders to grant sub-rights) to any Person for the purpose of carrying out the activities and businesses as described above on such terms and conditions as BIAL may determine are reasonably appropriate and are within the framework of the Agreement . The Concession Agreement sets out clearly the terms and conditions under which the project will be implemented through a public-private partnership.2 Concession Fee BIAL shall pay to GoI a fee amounting to four per cent (4%) of Gross Revenue annually on the terms specified in this Article 3. BIAL has accepted the concession granted to it by GoI pursuant to Article 3. and (iii) any activity or business in connection with or related to the development of the Site or operation of the Airport to generate revenues including the development of commercial ventures such as hotels. departure and/or handling of aircraft. conference venues. trade fairs.2. As far as the details of the Concession Agreement are concerned. and (ii)any activity or business in connection with or related to the arrival. cargo and/or mail at the Airport. each of whom agreed to participate as a shareholder in BIAL. meeting facilities.1. A.1 of the Agreement Thus GoI recognises that BIAL may carry out: (i) any activity or business related or ancillary to the activities referred to in Article 3. financing. subject to and in accordance with the terms of this Agreement.

post commencement of operations of the Airport GoI shall not act or omit to act in a manner which discriminates against the Airport or BIAL in a way that provides other Major Airports with an unfair competitive advantage when compared to the Airport or BIAL. an International Airport within an aerial distance of 150 kilometres of the Airport before the twentyfifth anniversary of the Airport Opening Date. Unique Zurich 17% and L&T 17%) 26% 100% ____________________________________________________asci research and consultancy 102 . and (ii) forty-five (45) days after the relevant application duly completed having been submitted. or improved or upgraded into. A. servants or agents and subject to full compliance and sustenance by such parties with Applicable Law. upon application made therefore by BIAL or its shareholders or their respective contractors. However. it is clarified that such discrimination does not include passage of laws in relation to fiscal or tax matters. and that (iii) the shareholding pattern of BIAL is as follows: Parties Private Promoters and Other Investors (as those terms are defined in the Shareholders Agreement) (collectively) State Promoters (as the term is defined in the Shareholders Agreement) (collectively) Total Percentage of issued and paid up share capital of BIAL 74% (Siemens Project Ventures 40%.4 Equivalent Treatment According to the Agreement. An important aspect of the Agreement is Exclusivity. The conditions of the Agreement in this respect are as follows: International No new or existing airport shall be permitted by GoI to be developed as. as the case may be. In addition BIAL represents and warrants to GoI that as at the date of this Agreement: (i) it is a public limited company limited by shares incorporated under the laws of India and has been properly constituted and is in continuous existence since incorporation. It is also clarified that if GOI enters into another concession agreement for establishing another airport. the same also shall not constitute discrimination. (ii) it is not engaged in any business other than the business of operating and managing airports and other ancillary activities. a Domestic Airport within an aerial distance of 150 kilometres of the Airport before the twenty-fifth anniversary of the Airport Opening Date.Competition Issues in the Air Transport Sector in India the Ministry of Civil Aviation to take any action that would constitute a breach of this Agreement if such body were party to this Agreement in place of GoI. or improved or upgraded into. are granted by it within a period ending on the later of (i) the end of the relevant statutory period (if any). Domestic No new or existing airport (except for Mysore and Hassan airports) shall be permitted by GoI to be developed as. the Ministry of Civil Aviation shall endeavour that all Clearances to be granted by it or that are within its direct control and as are required for or in connection with the Project. Further.

or accepted by. BIAL shall be required to obtain approval thereof from the IRA. any person or will be paid to. or accepted by. According to the Agreement. to its knowledge. which shall be based on the final audited project cost. suits. The Agreement includes clauses relating to the construction of the Airport (Article 7) and a section on airport operation and maintenance(Article 8) Articles 8. Unless otherwise agreed in writing between the Parties such approved Regulated Charges shall comply with the ____________________________________________________asci research and consultancy 103 . in cash or kind. The Ministry of Civil Aviation shall. or investigations pending or.5 Charges Parties having right to impose charges Subject to Applicable Law.) shall be consistent with ICAO Policies. grant its approval thereto within a period of sixty (60) days of the date of the application being submitted by BIAL. If at any time prior to the date the IRA has the power to approve the Regulated Charges BIAL wishes to amend such charges.2.1.Competition Issues in the Air Transport Sector in India (iv) there are no actions. An important aspect of the Agreement is that of Slots. any person or on its behalf by way of fees. threatened against it at law or in equity before any court or before any other judicial. subject to the proposed charges being in compliance with the principles set out in Article 10. Airport Charges The Airport Charges specified in Schedule 6 (. A. subject to the same being allocated fairly and not arbitrarily and shall use reasonable endeavours to accommodate the relevant airline operators the slots allocated at the Existing Airport at the time of its closure.. have been paid to. Prior to Airport Opening BIAL shall seek approval from the Ministry of Civil Aviation for the Regulated Charges. grant its approval of such amendments within a period of sixty (60) days of the date of the application being submitted by BIAL. details of the Regulated Charges proposed to be imposed for the next succeeding relevant period together with such information as the IRA may require for review. The Regulated Charges set out in Schedule 6 shall be the indicative charges at the Airport.9 and 8. the outcome of which may result in a breach of this Agreement or which individually or in the aggregate may result in any material impairment of its ability to perform its obligations under this Agreement. or vehicular traffic on the Airport or the Site. and (v) no sums.1. subject to the proposed Regulated Charges being in compliance with the principles set out in Article 10. BIAL shall have the final right to allocate slots at the Airport. From the date the IRA has the power to approve the Regulated Charges.2. proceedings. commission or otherwise to induce GoI to enter into this Agreement. The Ministry of Civil Aviation shall.Regulated Charges. no Person (other than BIAL. it shall seek consent from the Ministry of Civil Aviation for such amendments. any Service Provider Right Holder granted a relevant Service Provider Right or the AAI) may impose any charge or fee (a) in respect of the provision at the Airport of any facilities and/or services which are included within Airport Activities or (b) in respect of the movement of passenger. In this regard BIAL shall submit to the IRA. quasi-judicial or other authority.10 relate to management of the airport business and general obligations of BIAL. in accordance with any regulations framed by the IRA.

from embarking domestic and international passengers. Charges Parties having right to impose charges According to the Agreement. passengers and other users and in respect of both domestic and international aircraft and passenger movements. This component of cost towards Security Expenditure on CISF shall be revised upwards by BIAL as and when directed by GOI. w. is inclusive of the cost of Security Expenditure on Central Industrial Security Force (CISF). Other Charges However. as given above.2 of this Agreement. 1000 kgs) (b) The minimum fee for per single landing will be INR 1000.Competition Issues in the Air Transport Sector in India principles referred to in Article 10. the following Regulated Charges: (i) Landing. for the provision of passenger amenities. duly increased subsequent years with inflation index as set out hereunder. Prior to Airport Opening BIAL shall seek approval from the Ministry of Civil Aviation for the Regulated Charges.e. subject to Applicable Law. as set out hereunder. as set out hereunder. Housing and Parking charges (Domestic and International): The charges to be adopted by BIAL at the time of airport opening will be the higher of: (a) The AAI tariff effective 2001 duly increased with inflation index. up to the airport opening date Or (b) The then prevailing tariff at the other AAI airports (ii) Passenger Service Fee (Domestic and International): The charges to be adopted by BIAL at the time of airport opening will be the higher of: a) The AAI tariff effective 2001 duly increased with inflation index. Regulated Charges Pursuant to the principles set out in Article 10. upto the airport opening date Or b) The then prevailing Passenger Service Fee at the other AAI airports. any Service Provider Right Holder granted a relevant Service Provider Right or the AAI) may impose any charge or fee (a) in respect of the provision at the Airport of any facilities and/or services which are included within Airport Activities or (b) in respect of the movement of passenger. services and facilities and the UDF will be used for the development.0 (c) Peak hour surcharge on International landing between 2301 hrs (IST) to 2400 hrs (IST) will be 5% ____________________________________________________asci research and consultancy 104 . no Person (other than BIAL. management.2.e. (iii) User Development Fee (UDF) (Domestic and International): BIAL will be allowed to levy UDF.1 until the earlier of (i) the date that outstanding Debt in respect of the Initial Phase has been repaid and (ii) fifteen (15) years from Financial Close. or vehicular traffic on the Airport or the Site. Note: (a) Charges will be calculated on the basis of nearest MT (i. at rates consistent with ICAO Policies.f Airport Opening Date. The Regulated Charges set out in Schedule 6 shall be the indicative charges at the Airport. maintenance. The Passenger Service Fee chargeable by BIAL. operation and expansion of the facilities at the Airport. which shall be based on the final audited project cost. BIAL and/or Service Provider Right Holders shall be free without any restriction to determine the charges to be imposed in respect of the facilities and services provided at the Airport or on the Site. BIAL shall be entitled to levy and recover from airline operators. other than the facilities and services in respect of which Regulated Charges are levied.

The structure of the Agreement is identical to the agreement with Bangalore International Airport. will be applicable. (e) All Tariffs are net for BIAL. operation and maintenance of the Hyderabad International Airport was signed between the Ministry of Civil aviation. The issues raised are exactly the same for the Delhi Airport. US$ into INR the rateas on the 1st day of the month for 1st fortnight billing period and rates as on 16th of the month for the 2nd fortnightly billing period. B. Below we discuss the Agreement for the Mumbai Airport. Any taxes such as Service tax. Both Agreements have the same structure. State Support Agreements for the Mumbai and Delhi Airports. Hyderabad International Airport Limited The concession agreement for the development. will be over and above the tariff proposed. C. if applicable. Government of India and the Hyderabad International Airport Limited in December 2004. ____________________________________________________asci research and consultancy 105 . construction.Competition Issues in the Air Transport Sector in India (d) If US $ rates are to be charged the following rule for conversion. State Support Agreements in relation to the modernization and restructuring of the Mumbai Airport and the Delhi Airport were signed between the Government of India and the Mumbai International Airport Private Limited as well as the Government of India and the Delhi International Airport Private Limited in April 2006.

or cause to be provided. GOI hereby undertakes to provide to the JVC the following support (“GOI Support”): GOI Services GOI shall. or its designated nominees/representatives. In consideration of the JVC having entered into OMDA and to enhance the smooth functioning and viability of the JVC. provide to GOI. on such terms and conditions (including consideration for rendering of such services) as may be reasonably acceptable to both Parties. as part of its policy of liberalization entrusted the functions of management of airports in India to the Airports Authority of India (hereinafter AAI) established under the Airports Authority of India Act. is a company incorporated in India under the Indian Companies Act. provided however. maintain. Government of India. Security Services. develop. Plant Quarantine Services. in addition to the obligations of the AAI under the OMDA. AAI and JVC have entered into an Operation. the GOI is agreeable to provide some support to the JVC. or its designated nominees/ representatives to provide the GOI Services at the Airport. at the Airport the Reserved Activities (other than air traffic control and air navigation services) (hereinafter referred to as the “GOI Services”). design. Customs Control. the Airport. iii. Ltd. that operational space for provision of GOI Services at the Airport shall be provided at ____________________________________________________asci research and consultancy 106 . Immigration Services. Health Services vi. GOI shall at all times have the right. finance and manage etc. in whole or in part. with such access as reasonable so as to enable GOI. Animal Quarantine Services v. finance and manage Chattarpati Shivaji International Airport. The JVC shall further provide to GOI. or procure the provision of. Meteorological Services. at no cost to GOI. modernize. the AAI searched for private participants competent and desirous to operate. the JVC shall. Mumbai (hereinafter referred to as the “ “JVC”). Provided however. GOI SUPPORT In consideration for the JVC entering into the OMDA and the covenants and obligations set out therein. iv. Currently. throughout the Term. the GOI Services are: i. at its option. In furtherance of the liberalization policy. construct. Further.Competition Issues in the Air Transport Sector in India The Mumbai International Airport Pvt. and vii. Mumbai (hereinafter the Airport). ii. A special purpose vehicle company (hereinafter the JVC) has been incorporated for the aforesaid purpose with AAI and the private participants as shareholders. provide. Management and Development Agreement (hereinafter the OMDA) whereby they have agreed upon the terms and conditions upon which the JVC shall operate. upgrade. with such space requirements as reasonable so as to enable GOI. In order to allow GOI to provide. 1994. or its designated nominees/representatives. 1956. to require the JVC to undertake and provide any or all of the GOI Services. having its registered office at CSI Airport. the GOI Services. or its designated nominees/representatives. or its designated nominees/representatives to provide the GOI Services at the Airport.

discuss and agree to any amendments to the space requirements of GOI or its designated nominees/representatives that may be required as a result of such expansion. which is expected to have a capital cost in excess of Rupees 100. The Joint Co-ordination Committee shall meet at least once every quarter at the Airport. Pune or at any other place in its vicinity. nothing in this Clause 3. and the JVC and GOI shall. CO-ORDINATION COMMITTEES Joint Co-ordination Committee In order to ensure smooth and efficient rendering of the GOI Services. in which the JVC can also participate if it wishes to exercise its ROFR as set forth below. modernization or redevelopment of or at the Airport which involves the movement or reconfiguration of any space or facilities used by GOI or its designated nominees/ representatives. In the event. starting in the first instance within thirty (30) day(s) of the Effective Date. the Parties hereby undertake and agree to set up a joint co-ordination committee (the “Joint Co-ordination Committee”) consisting of (i) the JVC Representative. Each Major Development Plan must be in accordance with the OMDA and the parameters set out here in below: • • • It should be in accordance with the current Master Plan It should meet the Development Standards and Requirements It should have been subject to consultation with all relevant stakeholders and. Right of First Refusal The “Right of First Refusal (ROFR)” with regard to a second airport within a 150 km (One Hundred and Fifty Kilometer) radius of the Airport will be given to the JVC by following a competitive bidding process. (v) the Security Services Representative.00. the JVC is not the successful bidder but its bid is within the range of 10% of the most competitive bid received. ____________________________________________________asci research and consultancy 107 . (iv) the Meteorological Services Representative.4. within a reasonable period of time. or its designated nominees/representatives and back office space shall be provided at 50% of the applicable commercial rent for other back office rentals/office rentals at the Airport. must be the subject of full consultation with airport users and adequately take into account their requirements. It is expressly acknowledged by the Parties that in such event back office space for GOI Services may be provided outside the terminal buildings.16 . the JVC will have the ROFR by matching the first ranked bid in terms of the selection criteria for the second airport.00. (iii) the Immigration Services Representative. the JVC shall duly inform GOI.Competition Issues in the Air Transport Sector in India no cost to GOI. Major Development Plan Review The JVC must prepare and submit to GOI a Major Development Plan for each major development or any development.1 shall apply to any proposal by GOI to develop a second airport at Chakan. (ii) the . provided the JVC has satisfactory performance without any material default (being a default entitling the counter party to suspend obligations and/ or terminate the agreement) under any Project Agreement at the time of exercising the ROFR. (vii) Animal Quarantine Services Representative (viii) Health Services Representative and (viii) the AAI Representative. Provided however. In the event of any further expansion. in the case of aeronautical developments.000/(Rupees One Hundred Crore Only). modernization or redevelopment of or at the Airport.Customs Control Representative. (vi) the Plant Quarantine Services Representative.

RAL wrote to EGOM alleging that the consultants have acted in an improper manner and said that the assessment is biased. GRC endorsed the views of EC. The matter was placed before the EGOM in December 2005. (ii) State Government Representatives. Reliance case The formation of joint ventures for the Delhi and Mumbai airports as a part of the privatization policy of the Government of India (GOI) was challenged by Reliance Airports Developers Private Limited(RAL) which was one of the losing bidders. An Inter Ministerial group (IMG) was set up to assist the EGOM for restructuring of the two airports.Competition Issues in the Air Transport Sector in India In order to ensure the smooth and efficient operation of the Airport and to facilitate interaction and co-ordination between the JVC and GOI in relation to all policy related matters and decisions undertaken/ proposed to be undertaken by GOI in relation to the Airport. ____________________________________________________asci research and consultancy 108 . and (iv) the AAI Representative has to be set up which shall. • • • • • • • • • The process of selection of the JV partners was as follows: Technical bids were opened in September 2005. In December 2005. There are other clauses in the Agreement relating to Change in Law and Dispute Resolution . The RFP was issued in April 2005. GRC submitted its report to IMG. a co-ordination committee (the “Airport Co-ordination Committee”) consisting of (i) the JVC Representative. (GTA). EGOM met to set up a Committee of Experts(COS) to advise CGOM on all matters relating to the construction of the two airports. a first step was the privatization of two airports i. In March 2003. Further clarifications were sought by EGOM from IMG. based on which the JV partners were to be selected. hold meetings as required or at the instance of either Party. LC and FC. Mumbai and Delhi on a joint venture basis.. Background of the case As a part of GoI’s avowed policy of privatisation of strategic national assets. bid evaluation criteria etc. In September 2003. The GRC held meetings in November 2005 to review the EC report.e. The IMG set up a review committee to review the evaluation carried out by GTA. On the basis of recommendations received from the IMG. Airports Authority of India (AAI) initiated the process to consider modernization of Delhi and Mumbai airports. the Legal Consultant(LC) and the Financial Consultant(FC). the Government Review Committee(GRC) was constituted to undertake an independent review of the evaluation report prepared by EC. The tendering process involved two tiers: an expression cum request for qualification (ECRQ) and a request for proposal (RFP). There were six bidders for Delhi and five bidders for Mumbai. FORCE MAJEURE Either Party shall be entitled to suspend or excuse performance of its respective obligations under this Agreement to the extent that it is/they are unable to render such performance due to an event of Force Majeure. An Invitation to Register an Expression of Interest(ITREOI) was issued for the two airports. GOI approved the restructuring of Mumbai and Delhi airports through the joint venture (JV) route. An Empowered Group of Ministers (EGOM) was constituted to decide upon the detailed modalities including design parameters. The Review committee was called as the evaluation committee (EC). the EGOM approved the appointment of the Global Technical Adviser. (iii) the GOI Representative. In October 2005.

In February 2006. GMR. There was obviously a detailed multi tier decision making process in place in the process of award of the Concession Agreements for the Delhi and Mumbai airports. Creation of the GETE is a part of the ‘in house mechanism’. RAL argued that in the initial assessment. Thus the award of contract to the third ranked bidder i. A Shareholders Agreement was signed with GMR and GVK. Other committees did not have adequate technical knowledge. RAL opined that the appointment of GETE was itself unauthorized. The above case is an example of a litigation against the award of concession agreement for privatization of Delhi and Mumbai airports. The Court said that it is within the powers of the EGOM to decide what input it can take and what is the source of these inputs. GOI and AAI submitted that EC’s report had flaws. 26% shares in SPV were allotted to AAI and 74% shares were allotted to GMR. RAL further argued that there was no justification for reduction of technical standard from 80% to 50% because this compromises with quality. The appellant lost the case in the Supreme Court. By giving GMR the option of choosing one of the airports. GETE was to review the consultants’ report. EGOM has reasons for appointment of GETE. The counsel also remarked that the appellant appeared to have access to information which was confidential. The counsel questioned the source of information for the appellant. is against public interest according to RAL. In March 2006. There is no question of taking the view of one committee in preference to another. The decision making process is strengthened by formation of all these committees. a Special Purpose Vehicle (SPV) for both airports was formed. ____________________________________________________asci research and consultancy 109 . RAL has not been able to get any of the airports. although in one case RAL’s bid was above the benchmark and also its bid was among the best among those who had fallen below the benchmark for the other airport. counsel for GVK. RAL went on to argue that EC was the expert body. GMR should have been allotted the Mumbai airport because of the superior quality of the bid for this airport. Adoption of technical criteria for one airport and financial criteria for the other is not in accordance with law. The process involves multi tier decision making.Competition Issues in the Air Transport Sector in India • • • • • • • • • • • • • • • • • • COS set up a two member committee-Group of Eminent Technical Experts(GETE). only GMR and RAL had crossed the benchmark. 26% shares in SPV were allotted to AAI and 74% share allotted to GVK. The report from EC is not binding on the IMG or the EGOM. RAL was left out because its bid in the case of the other airport had fallen below the benchmark. GVK who had scored merely 59% on the development side and whose bid had been commented upon adversely by all committees. It is not bound to accept the views of any one committee. GOI informed GMR and GVK that they have been selected as successful bidders for undertaking restructuring and modernization of the Delhi and Mumbai airports. It said that the reduction of technical norms from 80% to 50% was impermissible. RAL’s writ petition before High Court was dismissed in April 2006.e. Similarly. The above brief description of the case indicates clearly that the Supreme Court ruled against the RAL. The Court ruled that pivotal challenge by the appellant is to the constitution of the GETE and the scope for its constitution. If in respect of one airport. GETE Report was submitted to the COS and then to EGOM in January 2006. RAL had scored over 80% on the development side and fell short of just 6% less than 80% on the management side. then in respect of the second airport. RAL argued that GMR had qualified in both the bids. Various committees have been constituted even though their constitution is not specifically mentioned in the RFP. The benchmark of 80% should not have been lowered. GMR was given the option of matching the financial bid of the appellant. In response. similar option should have been given to RAL to match the financial bid of GVK. The stand of RAL was that EGOM/GOI should have accepted the recommendations of the EC and should not have asked GETE to make further examination. Thus. Thus.

The Concessionaire agrees to the conditions. operate and maintain the Terminal and regulate the use thereof by Third Parties as laid down in the Agreement. make commercial use of the real estate and to construct/install buildings for handling of cargo. license and authority during the subsistence of the Agreement to develop.Competition Issues in the Air Transport Sector in India Model Concession Agreement for Non Metro Airports The structure of the Model Agreement is similar to the Concession Agreements for BIAL and HIAL. access and license to the site for undertaking obligations under the Agreement. The Concession thus entitles the Concessionaire to the following: • right of way. • develop and maintain the City side in accordance with the Agreement. transfer or sublet or create any lien or encumbrance on this agreement or the project. • demand and collect appropriate fee from vehicles and persons liable for payment of fee and refuse entry to those who do not pay. It consists of six parts followed by schedules. operate and maintain : • The Terminal for a period of 30 years commencing from Commercial Operation Date (COD) • The City side for a period of 60 years commencing from COD. The parts are as follows: Part 1: Definitions and Interpretation Part II: The Concession Part III: Development and Operations Part IV: Financial Covenants Part V: Force Majeure and Termination Part VI : Other provisions The Model Agreement is between the AAI and the Concessionaire or the company where the latter is proposed as a company incorporated under the Companies Act 1956. ____________________________________________________asci research and consultancy 110 . the Concessionaire is permitted to manage the Terminal Building and make commercial use of it in accordance with the relevant provisions of the Agreement. together with provision of Project Facilities as specified in Schedule B (type Schedule B) and in conformity with specifications and standards set forth in Schedule C(type Schedule C) • Operation and maintenance of the Terminal and City Side in accordance with the provisions of this Agreement. • Apart from these. Grant of Concession The Authority grants to the Concessionaire the exclusive right. • The concessionaire is also allowed to develop and make commercial use of the car park. • bear and pay all costs and charges and • not assign. • The concessionaire is also permitted to develop the real estate earmarked as city side. The Project encompasses: • Development of the Terminal and City side on the Site as specified in Schedule A(type the contents of Schedule A and put in annexe). • develop. except as permitted by the Agreement. • Performance and fulfillment of all other obligations of the Concessionaire in accordance with the provisions of this Agreement.

In case it is not the best offer. passenger amenities. The concessionaire shall be entitled to levy and collect appropriate fee for entry of vehicles. conclusive and binding on the concessionaire. visitors to the Terminal Building and handling of cargo subject to the maximum specified by the Fee Notification. beverages. vending machines and kiosks for sale of items like eatables. Management of the Terminal Building In the context of commercial use of specified areas. The authority also agrees to provide the concessionaire with the Right of First Refusal in case the Authority invites any bids for award of concessions or contracts for development and/or operation of any part of the Terminal. The concessionaire further undertakes that it shall not give effect to any such acquisition of equity or control of the Board of Directors of the concessionaire without prior approval of the Authority. crews and passengers for use of the airport shall be retained and appropriated by the authority for meeting the cost of its services including its capital investment. travel accessories. the Agreement lays down that spaces that are earmarked and specified for purposes such as travel facilities. in aggregate of not less than 15% of the total equity of the concessionaire or. This implies that it shall invite the concessionaire to participate in the bid process and select the concessionaire for award of the contract if the latter’s bid is the best offer. User Fee • • The concessionaire acknowledges and agrees that all fees and charges collected by the authority from airlines. acquisition of any control directly or indirectly of the Board of Directors of the concessionaire either by a person or together with other persons. the concessionaire may also undertake commercial advertising subject to applicable laws. Financial Covenants Concession fee The concessionaire shall pay to the authority sums which will be modified to reflect the variation in WPI. The concessionaire acknowledges that all types of acquisitions of equity by an acquirer either by himself or with any person directly or indirectly including by transfer of the direct or indirect legal or beneficial ownership or control of any equity.Competition Issues in the Air Transport Sector in India Obligations of the concessionaire related to changes in ownership In principle the concessionaire shall not undertake or permit any change of ownership except without the prior approval of the Authority. as specified for counters. ____________________________________________________asci research and consultancy 111 . books and periodicals etc. the authority shall award the contract to the concessionaire. The decision of the Authority is final. Obligations of the Authority The agreement says that the authority agrees to provide all assistance to the concessionaire in the implementation and operation of the project. aircrafts. restaurants and retail shall be used by the concessionaire for such purposes. will constitute a change in ownership requiring prior approval of the Authority. it will be given an opportunity to make an offer that is 10% better than the best offer. In case the concessionaire makes such an offer. The concessionaire also has access to additional space.

the terms and conditions for payment are also laid down in the Agreement. dispute settlement and miscellaneous items. This is the background. including civil enclaves at Defence Airports. Upon Termination. set up by the Central Government to prepare the road map for civil aviation sector recommended the setting up of an independent regulatory authority. The default leading to the Termination may be on account of the concessionaire or the Authority. Suspension of Concessionaire’s Rights If there is a default on the part of the concessionaire. It was therefore. liability and indemnity. fixed the aeronautical charges for the airports under its control as well as prescribed and monitored the performance standards of all airports. Post privatization of airports in accordance with the Airport Infrastructure Policy formulated in 1997. under which the Concession Agreement may be terminated. This would also encourage investment in airport facilities. 2008. In fact. The aim of the AERA was thus to create a level playing field and foster healthy competition amongst all major airports. considered necessary to enact a law for the establishment of the Regulatory Authority. the Airports Economic Regulatory Authority (the Regulatory Authority). were under the control of the Airport Authority of India (Airports Authority) in the Ministry of Civil Aviation. change in law. Thus the Airports Authority. for the creation of an independent economic regulator. The Airport Economic Regulatory Authority of India Act 2008 received the assent of the President on December 5. rights over the site. the Naresh Chandra Committee. the need for setting up an independent regulatory authority became evident in order to ensure competition. Airport Economic Regulatory Authority Act Background Most of the civil airports. Other Provisions The Agreement sets out terms and conditions for assignment and charges. Non political and political events are defined under the Agreement. ____________________________________________________asci research and consultancy 112 . The Agreement lays down the effects of the Force Majeure event on the Concession including the conditions under which Termination notice may be given by either party on account of a force majeure event. namely. with the approval of the Central Government.Competition Issues in the Air Transport Sector in India Force Majeure A Force Majeure event is the occurrence of a political or a non political event which affects the obligations of the party under the Agreement. Termination There are specific terms and conditions laid down. the Authority can suspend all rights of the Concessionaire under the Agreement including the Concessionaire’s right to collect fee and other revenues from the Terminal. The Authority may exercise such rights itself or authorize any other person to exercise such rights. It is an Act to provide for establishment of an Airport Economic Regulatory Authority to: • Regulate tariff and other charges for the aeronautical services rendered at airports.

under Section 13 of the Act. conduct enquiries into the affairs of any service provider and inspect books of account of any service provider. Determine the development fee in respect of major airports. • For ground handling services relating to aircraft. AERA will determine the tariff once every five years and. • For ground safety services at an airport. It is to be noted that different tariff structures may be determined for different airports taking note of the above factors. AERA has the power to issue directions to service providers from time to time and seizure of documents if required. As far as the power and functions of the AERA are concerned. Determine the amount of passenger service fee. • All private airports and leased airports. surveillance and related supportive communication for air traffic management. quality of service provided. The AERA will be a corporate body and will consist of a chairperson and two other members to be appointed by the Central Government. AERA should ensure transparency in its functioning through due consultation with stakeholders. if required in the public interest. the AERA will perform the following functions: Determine the tariff for aeronautical services taking into consideration factors including capital investment incurred and timely investment in provision/ improvement of airport facilities. Monitor the set performance standards relating to quality. • All civil enclaves • All major airports. other than airports and airfields that belong to or are controlled by the armed forces. AERA has the power to call for information from service providers. where major airports are defined as any airport which has or is designated to have annual passenger thoroughput in excess of one and half million. charges may be determined by the AERA. Further. • For cargo facilities at an airport.Competition Issues in the Air Transport Sector in India • • To monitor performance standards at airports To establish an Appellate Tribunal to abjudicate disputes and dispose of appeals The Act applies to: • All airports where air transport services are operated or are intended to be operated. passengers and cargo at an airport. economic and viable operation of airports. Aeronautical services are defined as service provided: • For navigation. In discharging its functions. amend it from time to time within the period of five years. revenue received from services other than aeronautical services. ____________________________________________________asci research and consultancy 113 . • For supplying fuel at an airport. AERA can call for the information necessary for determining tariff. • For landing. and should allow all stakeholders to make their submissions to the Authority. Establishing of the AERA The Act states that within three months from the date of commencement of the Act. housing or parking of an aircraft or any other ground facility offered in connection with aircraft operations at an airport. continuity and reliability of service. • For a stakeholder at an airport for which. costs for efficiency improvement. with the airport. in the opinion of the Central Government. the Central Government will establish the AERA with the requisite powers and functions as laid down in the Act.

Competition Issues in the Air Transport Sector in India

Establishment of Appellate Tribunal known as AERA Appellate Tribunal (Section 17)
The Central Govt will establish an Appellate Tribunal known as AERA Appellate Tribunal to abjudicate any disputes between service providers or between a service provider and a group of customers, provided that this clause will not apply to: Matters relating to monopolistic trade practices, restrictive trade practices or unfair trade practices subject to the jurisdiction of the MRTP Commission established under the Monopolies and Restrictive Trade Practices Act 1969. Complaint of a consumer that can be addressed by a Consumer Disputes Redressal Forum or Consumer Dispute Redressal Commission or National Consumer Redressal Commission established under the Consumer Protection Act 1986. Matters which are within the purview of the Competition Act 2002. Section 18 of the Act deals with settlement of appeals, disputes made to the Tribunal as below: • The Central Government, State Government a local authority or any person, may apply to the Appellate Tribunal for abjudication of any dispute as stated above in Section 17. • The bodies as above, aggrieved by any direction , decision or order made by AERA may prefer an appeal to the Appellate Tribunal. • The appeal should be made preferably within 30 days of receipt of the order from AERA by the Central Government, State Government or the local authority. • The application for appeal should be dealt with within 90 days from the receipt of the application/appeal. • In case the application/appeal cannot be dealt with in 90 days, the Appellate tribunal will need to record its reasons in writing for not disposing of the application/appeal within that period. • The order passed by the Appellate Tribunal is to be executable as a decree of the civil court.

Competition Issues in Airports
In this section, competition issues in airports are discussed. Also issues relating to regulation vs competition are analysed in detail.

Right of First Refusal (ROFR)
Theoretically, ROFR is expected to function as a price setting mechanism that helps solves problems such as risk sharing and alleviation of market failures. Conceptually, ROFR is a right that is awarded by the seller of an asset to a special buyer whereby the special buyer can purchase the asset at the highest price offered to the seller by any other buyer4. Thus, through the ROFR, the seller is giving a special advantage to the special buyer, wherein the special buyer is more likely to buy the asset from the seller. Also because of the ROFR, depending upon the price quoted by the other bidders, the special buyer may also pay a lower price than he would in the absence of possessing this right. We discuss these issues in detail below: Granting a ROFR may have certain advantages. It may make economic sense in a situation where a special buyer needs to protect his investment, for instance, in the case of real estate. Thus, in the case of a commercial tenant/lessee who is considering whether or not to upgrade the property that he On the Right of First Refusal, S.Bhikchandani, Lippman S.A., Ryan R. Rethinking Right of First Refusal, David I.Walker
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is renting/leasing, particularly if there is a sufficient period left on the lease/rental to recoup the investment, grant of a ROFR either as a lease or a lease extension, can protect the tenant’s investment. A second instance can be for instance, if a landlord wishes to sell his property, the current tenant may like the opportunity to become his own landlord. Thirdly, in a partnership, the original partners may wish to avoid taking in a new partner and may wish to buy the existing partner’s interest at a price to be paid by a potential new partner. Finally, a firm seeking to take on a new project may wish to avail the benefits of the new venture. However there are negative aspects to granting ROFR. Firstly, it may not always be in the interests of the seller to offer a ROFR. In a situation where the special buyer’s valuation of an asset is not the highest among all potential buyers, a ROFR may in fact increase the special buyer’s profits. In this case therefore, the outcome of the ROFR is inefficient. In fact, because of the ROFR, regular buyers, who are not being granted the ROFR may be discouraged from entering the market and may bid less aggressively, thus reducing their own surpluses and increasing the inefficiency of the sale. Thus the seller is at a disadvantageous position and the special buyer would get an undue advantage. The extreme case would be a monopsonistic situation where there is a single buyer who uses his position to extract a ROFR on future sales of the buyer. In the case of airports, as a part of the concession agreements, ROFR is being granted to the JVC, with regard to a second airport within a 150 km radius of the existing airport. The ROFR will be given following a competitive bidding process in which the JVC can also participate if it wishes to exercise its ROFR. Thus in the event that the JVC is not the successful bidder, but its bid is within the range of 10% of the most competitive bid received, the JVC will have the ROFR by matching the first ranked bid in terms of the selection criteria for the second airport. Granting a ROFR in the above case to the JVC is a competition issue because as explained above, through the ROFR, the JVC is being granted a special advantage for developing a second airport on the market vis a vis the other bidders. This may discourage the other bidders from bidding aggressively and also enable the JVC to pay a lower price. The grant of ROFR thus restricts inter airport competition by providing the JVC with an unfair advantage vis a vis the other bidders for developing the second airport on the market. Why is inter airport competition important? Put differently, why should restrictions on inter airport competition be eliminated? As explained earlier, provision of air services requires two complementary inputs in fixed proportions, namely aircraft services or flights and airport services including take offs, landings, ground handling etc. Thus if there is to be effective competition on the market for air transport services, there must be adequate competition in both these markets. If there is limited competition among airlines, then ensuring competition among airports is not sufficient to reduce prices among customers because the market power previously exercised by airports will be transferred to the airlines. On the other hand if there is limited competition amongst airports then market power will be exercised by the airports thereby reducing benefits to consumers. Inter airport competition is therefore important in order to ensure competition in the airport sector. Hence, apart from encouraging establishment of new and/or privately owned airports by eliminating restrictions, encouraging PPPs etc, when there are two or more airports serving the same city, there should also not be common ownership i.e. they should not be under the same private ownership or control. ROFR by encouraging the existing company to acquire the right of developing the second airport is encouraging common ownership. To this extent this is a competition issue since it would affect competition on the airport market. Similarly, exclusivity in terms of not allowing a second airport to be developed within a certain distance from the existing airport also affects competition in the airports market because it restricts the choice of the passenger and discourages inter airport competition by not allowing a second airport to be developed.

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In general, inter airport competition is limited all over the world, because of various reasons, partly because relatively few cities are served by two or more airports and also because there are economies of scale in the provision of airports. Partly as a result of this, airports around the world are subject to significant regulation and also to State ownership. It is pertinent in this context to cite the case of the BAA limited* that was referred to the Competition Commission UK by the Office of Fair Trade, (OFT) UK. The major issue in the case was, whether provision of airport services by BAA limited which owns seven airports in the UK and accounts for more than 60% of all passengers using UK airports, prevents, distorts or restricts competition in the airport market. While the case examined in detail various factors that may affect competition amongst airports, major views that emerged were that common ownership of airports by a single entity appeared to have affected the pace of development of infrastructure at the BAA owned airports thereby adversely affecting the quality of services provided to the customers. Thus common ownership appeared to have contributed to the shortage of capacity in these airports which may not have happened if the airports were separately owned. This is a feature that affects or distorts competition in the airports sector because passengers do exercise choice between airports based upon various factors like flight schedules, lower fares and nature of service provided at the airport. And the choice may not necessarily be for the nearest airport. Thus BAA owning several airports may give to BAA undue market power over and above an individual airport. The point therefore is that common ownership of airports has an adverse effect on competition between airports on the airport market. On the other hand, effective inter airport competition encourages airports to set appropriate charges for slots, manage the institutional and infrastructural arrangements efficiently and provides incentives to invest in new capacity like new runways, new buildings and improved air traffic control services. Further, in the absence of effective inter airport competition, issues like regulation of slots, regulation and control on vertical relation between airports and airlines assume greater importance and effective regulations require to be emphasized and put in place. In general, barriers to entry are strong in the airline industry and dominant positions of a few airlines are prevalent. Regulation of slots is not sufficient to tackle barriers to entry of the small entrants. Creation of new airports, expansion of airports and ensuring inter airport competition are important in preserving and promoting a competitive environment in the air transport sector.

Regulation vs Competition
The relationship between sector regulators and the competition authority continues to be a controversial issue*. There are several issues involved such as the rationale for whether there is need for a sector regulator and the competition authority to coexist on the market, and also the interrelationship/overlap in terms of jurisdiction, between the two institutions. Some of these issues still remain unresolved and controversial. There does exist complementarity between the two institutions because a basic premise is that both the sectoral regulator and the competition authority aim at increase in economic growth. Further, both institutions seek to protect the consumer interest and prevent inefficient use of resources. However although there is similarity in the objectives of the two, there is traditionally a tension because of the difference in approach of the regulator and the competition authority. A major challenge that exists in this context is whether competition is stifled by sectoral regulation. A major difference is in the approach adopted by the two institutions. A regulator would address the issue of market power directly by setting tariffs, regulating quantity, quality, entry, exit and other such parameters and thereby reducing monopoly profits in a particular sector. The intervention is thus ex ante
* *

BAA market investigation: Emerging thinking (22nd April, 2008), Competition Commission, UK. We have drawn upon a presentation entitled “Interface between Competition Authority and Sector Regulators” by Mr Augustine Peter liberally in this sub-section. ____________________________________________________asci research and consultancy

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in nature, namely that it addresses behavioural issues before a problem arises. The competition authority would however prevent a monopoly by laying down principles across all the sectors for regulating mergers and acquisitions, preventing abuse of dominance and anti competitive agreements which may lead to abuse of competition principles and emergence of monopolies. The approach of the competition authority is thus ex post, namely it addresses behaviour issues after a problem arises, except for merger review which is ex ante in nature. Each institution thus has a unique role which cannot be acquired by the other. The following table effectively summarises the difference in approach between the two institutions

Table IX.1: Difference in Approach between Sector Specific Regulator And Competition Authority Sector Specific Regulator
Tells businesses “what to do” and “how to price products” Focuses upon specific sectors of the economy Ex ante – addresses behavioral issues before problem arises Focus upon orderly development of a sector that would presumably trickle down in a sector ensuring consumer welfare Sectoral regulators are usually more appropriate for access and price issues such as changing the structure of the market, reducing barriers to entry and opening up the market to effective competition Source:

Competition Authority
Tells businesses “what not to do”

Focuses upon the entire economy and functioning of the market Ex post (except merger review)

Focus upon consumer welfare and unfair transfer of wealth from consumers to firms with market power Competition legislation is usually more appropriate for affecting conduct and maintaining competition

Singh R, “Teeter-Totter of Regulation and Competition: Why Indian Competition Authority must Trump Sectoral Regulators”, www.cci.org.in

An important issue is relationship management between the competition authority and the sector regulator. This is because there can be a conflict in relationship between the two institutions due to various reasons including legal omissions/overlap and conflicting approaches. Such conflicts can lead to adverse effects on competition in the market resulting in decrease in consumer welfare and adverse effects on economic growth. The relationship between the two institutions can be formal, for instance, through right to participate in proceedings before the other, formal referrals that can be either optional or mandatory, appeal to a common authority, ban on interference in the other’s territory and laying down of jurisdiction of each institution. It can also be informal namely through contacts, meetings, joint working groups, exchange of officials and exchange of information. It is useful in this context to note that international experience in the context of the relation between the two varies across countries. While in many countries like Australia, Canada, Germany, EU, South Korea and Zambia a clear cut formal relationship exists in terms of jurisdiction between the two institutions, in others like Sri Lanka, Boswana, Kenya and Pakistan the jurisdictions between the competition authorities and the sector regulators are blurred and conflicts are left to be resolved by

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the CCI may also refer to the statutory authority. The Competition Act 2002 in Sections 21 and 21A. Appeals for abjudication of disputes can be made by the Central Government. AERA has the power to call for information from the service providers. the reference is not mandatory and the statutory authority should give its response within sixty days of receipt of such a reference but once again the opinion of the statutory body is not binding on the CCI. The aeronautical services tariff will be determined by AERA based on factors including capital investment incurred. an Appellate Tribunal known as AERA Appellate Tribunal will be established by the Central Government to abjudicate any disputes. AERA also incorporates the setting up of an Appellate Tribunal for abjudication of disputes. continuity and reliability of service. Specific time frames are laid down in the context of such appeal. Further. Disputes may arise between service providers or between a service provider and a group of customers. In general it can be said that there is wide variation in terms of international experience based on the differing social.Competition Issues in the Air Transport Sector in India Courts. Complaint of a consumer that can be addressed by a Consumer Disputes Redressal Forum or Consumer Dispute Redressal Commission or National Consumer Redressal Commission. Thus AERA as a sector regulator will basically be involved in tariff setting for aeronautical services provided by airports. however states that any statutory authority may make a reference to CCI and CCI has to give its opinion within 60 days. a local authority or any person who is aggrieved by any direction/decision or order made by AERA. Which are within the purview of the Competition Act 2002. However it clearly states under Section 17 that it will not abjudicate any dispute which falls within the purview of the Competition Act 2002. Similarly. It is an Act to provide for establishment of an Airport Economic Regulatory Authority (AERA) to regulate tariff and other charges for the aeronautical services rendered at airports. notable among which are that appeals should be made within 30 days of the receipt of the order from AERA by the relevant authority. to monitor performance standards at airports and to establish an Appellate Tribunal to abjudicate disputes and dispose of appeals. economic and viable operation of airports and revenue received from services other than aeronautical services. Further. different tariff structures may be determined for different airports taking note of factors like the development fee and passenger service fee in respect of major airports and monitoring of performance standards relating to quality. timely investment in provision/ improvement of airport facilities. to abjudicate disputes. restrictive trade practices or unfair trade practices subject to the jurisdiction of the MRTP Commission. ____________________________________________________asci research and consultancy 118 . However it is specified that this clause will not apply to : Matters relating to monopolistic trade practices. the Appellate Tribunal has to record its reasons in writing for not disposing of the application/appeal within that period. Relation between AERA and CCI As noted earlier. the appeal should be dealt with within 90 days from the receipt of the application/appeal and in case the same cannot be done within 90 days. but the opinion of the CCI is not binding on the statutory authority. can conduct enquiries into the affairs of any service provider and can issue directions to service providers from time to time. 2008. quality of service provided. On its part. costs for efficiency improvement. the AERA Act 2008 was passed on December 5. legal and economic scene across various countries. This is therefore a case of abstention on the part of AERA as the sector regulator. State Government.

Competition Issues in the Air Transport Sector in India Thus Appellate Tribunal set up by AERA will not abjudicate in any cases relating to cartels. acquisitions or a case concerning abuse of dominance including predatory pricing. there is no binding on CCI to consult or refer to the AERA. As far as CCI is concerned. it should be mandatory on any sectoral regulator. ____________________________________________________asci research and consultancy 119 . There is a certain formal relationship laid down in the context of requirement of abstention of AERA from cases within the purview of CCI as described above. mergers. It is difficult to discuss the relationship between the AERA and the CCI because each has its own relevance and importance. However in our view. including the AERA. to involve the CCI in identifying the relevant market and defining market power and concentration of ownership using the framework of competition policy before imposing any ex ante regulation like tariff setting.

namely. ____________________________________________________asci research and consultancy 120 . it appears quite clearly that the Domestic Air Transport Policy may required to be modified/revised particularly to take note of the emerging trends in the post merger scenario. Analyse the implications of this study for Competition Policy and Law. Thus the regulations relating to route dispersal guidelines. minimum fleet requirements. In order that competition concerns are addressed in this sector. marketing entry barriers. economies of scale etc • Likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins. • Entry barriers including regulatory barriers. As has been discussed in detail in an earlier section. should be analysed for the domestic segment of the air transport sector in India. financial risk. The factors which the Competition Commission is expected to have due regard to in the context of determining whether an agreement has an appreciable adverse effect on competition include among other the following: • Creation of barriers to entrants in new markets • Driving existing competitors out of the market • Foreclosure of competition by hindering entry into the market • Market share of the enterprise • Economic power of the enterprise including commercial advantages over competitors. the three major areas of the Competition Act. • Monopoly or dominant position whether acquired as a result of any statute by virtue of being a government company or a public sector undertaking. requirements of domestic flying for a minimum period and a minimum fleet for flying internationally and the stipulation that allows one airlines that is merging with another to take over the latter’s slots. Appropriate recommendations and suggestions should be made for the air transport sector. the Domestic Air Transport Policy lays down a number of regulations some of which may lead to creation of entry barriers for new entrants into this sector. have been made in the forthcoming ToR XI. In this context it may be pertinent to refer to Sections 19(3) . In this context. It appears that a majority of factors referred to as above that may have an adverse effect on competition are present on the market for air transport services and have a direct relationship to the Domestic Air Transport Policy. 19(4) and 20(4) of the Competition Act. these issues have been discussed in detail under ToR V and also ToRs II and III and we are therefore not repeating them here. As stated above. under ToR V. prohibition of abuse of dominant position. often create situation that create barriers to entry and also may strengthen dominance.Competition Issues in the Air Transport Sector in India X. • Likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market. anti-competitive agreements as well as regulation of combinations. technical entry barriers. Appropriate recommendations and suggestions with regard to the relevant aspects of the Domestic Air Transport policy referred to above.

Post merger. Kingfisher and Indian control a major share of the market. While there are a large number of players on the market. there is a definite trend towards increased market concentration.. It is suggested that airlines may be asked to submit.g. data such as: • Flight-wise passengers carried • Type of Aircraft used for each flight • Flight-wise Passenger Load Factor • Route-wise Revenue • Cost of Operation • Operating Margins • Fuel Costs as a percentage of total cost • Taxes and Surcharges collected per flight • Number of aircrafts owned and leased ____________________________________________________asci research and consultancy 121 . the following factors relating to the status of competitiveness are pertinent to summarise here: In accordance with Section 20(4) of the Act. We cannot however call it price collusion at this stage. • Share of Indian in terms of ownership of slots and share of total passenger traffic is coming down compared to Jet and Kingfisher. the Competition Commission is expected to give an opinion to the Central or State Government when the latter makes a reference to the Commission on possible effect of a policy on competition.Competition Issues in the Air Transport Sector in India XI. namely Jet. with reference to the passenger air transport sector. Examine issues relating to advocacy for the Competition Commission of India in order to enhance competition. • The market is oligopolistic. • Possibility of a failing business looms large in this sector due to rising fuel prices and intense price competition. market shares particularly in terms of share of slots of the two private players have increased substantially. In the above context. The following are the major areas of focus for competition advocacy. Provide appropriate suggestions and recommendations. in terms of ownership of slots. In accordance with Article 49(1) of the Competition Act pertaining to Competition Advocacy. on a regular basis. • There is some evidence of price parallelism between Jet and Kingfisher especially when the flights are scheduled closer together. Data Deficiency The Competition Commission of India may ensure that the required data at the industry level is available so that any cases or queries can be investigated effectively. factors that may be noted are: • Post mergers. • Mergers show indication of removal of a vigorous competitor from the market e. • However mergers have benefits in terms of increased efficiency. This is indicated by the Concentration index in the selected sectors and also by the analysis of share of total passenger traffic as well as share of slot of the airlines. It is thus losing market share in terms of the above indicators to the private players. in the case of Jet and Sahara on Delhi-Mumbai and Delhi-Chennai routes. three players. economies of scale etc. Given the above scenario the Competition Commission of India should focus on maintaining and promoting competition in the sector through competition advocacy.

Currently there are three agencies which have the requisite data. Under the universal service obligations. We also find that for an effective strategy on competition. while for others like Kingfisher only route-wise passenger information is available. Legal Aspects In this subsection we analyse the role of the CCI with respect to the issues concerning existing regulations in the airlines as well as in the airport sector and provide recommendations regarding the same. We also suggest that there should be a single nodal agency for collecting and collating the data. While data analysis at an aggregate level is being done by some of the agencies. Airlines Sector In the Domestic Air Transport Policy the following are the issues pertaining to the airlines sector which requires the attention of the CCI: Route Dispersal Guidelines In accordance with the Domestic Air Transport Policy. It is suggested that the reports and data which are to be mandatorily submitted to the office of the DGCA should be in a standard format. The above data are not available currently in a systematic framework. This would pose an entry barrier for the new entrants and affect the profitability of those already in existence. an option can be that they may be asked to provide services on these routes after a time lag of around five years from entry. namely. Thus. ____________________________________________________asci research and consultancy 122 . It is important to have comparable time series data relating to the sector. For the new entrants. detailed route wise analysis requires to be done. DGCA. Ministry of Civil Aviation and the Airports Authority of India. These guidelines are meant to ensure that the uneconomical routes are served by all airlines in order to ensure equity and adequate dispersal of air transport facilities to the less trafficked regions. the government may require to provide service to these regions. Further. flight-wise information is available. forcing air carriers to operate on less trafficked routes may in fact inhibit the operability and hence financial viability of all the airlines and especially the new entrants. route wise analysis is not being conducted/made available. However. We suggest that the CCI takes the required steps to ensure adequate and appropriate data availability.Competition Issues in the Air Transport Sector in India For Airports the following data may be made available: • Number of flights taking off and landing • Number of Slots available at each airport • Procedure of calculation of the capacity of the airport. Thus for example. keeping in mind the social development and corporate social responsibility issues related to the less trafficked routes. for some airlines like Indian. route dispersal guidelines have been laid down. However. as our Report has shown this is a highly competitive sector. the CCI may suggest that the Government of India provides a subsidy to the existing airlines (public and private) to provide services in these regions. the new carriers may be at a relatively greater disadvantage to spend on non financially viable routes than the older players who are already operating on the market.

Seeking to prescribe minimum financial ownership by air carriers. creating a barrier to entry versus encouraging low net worth carriers can be a balancing act. It may be noted here that prescribing minimum equity requirements is not an uncommon practice in several infrastructure sectors. a minimum requirement in terms of years of experience is justified for pre qualifying air carriers. The US for instance. minimum equity restrictions have been laid down as an entry requirement for airline operators. However. Therefore. Thus while foreign financial institutions and other entities can make an investment in this sector. It may be said that while the minimum of five years experience seems appropriate. The minimum fleet requirement is to ensure uninterrupted and safe operations. This regulation may be required for the airlines sector in India. for a five fleet carrier with take off weight more than 40000 kg. the minimum equity capital requirement is Rs 20 crore. For carriers with take off weight less than 40000 kg.Competition Issues in the Air Transport Sector in India Equity and Fleet Requirements: As per the Domestic Air Transport policy. Requirement of domestic flying for five years and a minimum fleet of 20 aircrafts for flying internationally The intent of this regulation was to ensure proven credential of the airlines in the domestic sector. the minimum fleet requirement of 20 aircrafts is debatable. an additional equity investment of Rs 10 crores is required. a minimum of five aircrafts seems reasonable. Thus. the minimum equity capital requirement is Rs 50 crore . Thus. Therefore ____________________________________________________asci research and consultancy 123 . operating with five aircrafts. In the context of the equity requirements laid down as above. This is because even if a carrier were to begin operations on two or three distinct routes and assuming that they were not to duplicate the same aircraft for operations along these routes. they would need at least three or four aircrafts with a spare of one aircraft. The CCI may like to examine this aspect. does not permit foreign airlines to operate on domestic routes. It may be said here that this may not be too stringent a requirement for air carriers to meet. Given the extensive operational and management processes. a minimum fleet size of five aeroplanes or five multi engine helicopters is required. and with each addition up to five aircrafts. However the basis of arriving at the figure of five aircrafts as opposed to three or four is not clear. will ensure seriousness of both the owners as well as the venture capitalists. as well as institutional knowledge required to operate on international routes. Further. especially those with less net worth. Prohibition of equity requirements by foreign airlines While foreign equity participation up to 49% and investment by NRIs up to 100% is permitted. This may therefore be looked into by CCI. a key requirement is to ensure that the equity structure is not prohibitive enough to inhibit competition and entry of new carriers. A high equity ratio can become an entry barrier and thus create an undue advantage to carriers with high net worth. an additional equity investment of Rs 20 crore is required. This type of restrictions on foreign airlines exist in other countries as well.and with each addition of up to five aircrafts. for example a small carrier that operates two or three flights a day may require no more than 4 or 5 aircrafts including spares to ensure continued operations. foreign airlines are not allowed to pick up equity directly or indirectly. Procurement of contractors normally requires minimum performance guarantees while pre qualifying on the basis of several factors including financial net worth. tie ups with and holding of equity by foreign airlines are not permitted. the basis of minimum equity capital requirement laid down in the Policy is unclear.

AERA also incorporates the setting up of an Appellate Tribunal for abjudication of disputes. the CCI may also refer to the statutory authority. We suggest that the CCI should recommend that in a situation where there is strengthening of dominance post merger in terms of market share. it is difficult to remove this right unless a proposed merger is sufficiently large to require approval from the CCI. Airport Sector Relationship between CCI and AERA In an earlier section we have discussed in detail the relation between the AERA and CCI.this process. in the context of mergers. Thus AERA will not abjudicate in any cases relating to cartels. Similarly. this aspect can be incorporated into the slot allocation policy. This is therefore a case of abstention on the part of AERA as the sector regulator. AERA as a sector regulator will basically be involved in tariff setting for aeronautical services provided by airports. However such user rights must be in use by the airlines that takes over otherwise they will be taken over by the Government/airport operator. As far as CCI is concerned. The CCI can consider initiating . however states that any statutory authority may make a reference to CCI and CCI has to give its opinion within 60 days. but the opinion of the CCI is not binding on the statutory authority. to involve the CCI in identifying the relevant market and defining market power and concentration of ownership using the framework of competition policy before imposing any ex ante regulation like tariff setting. the reference is not mandatory and the statutory authority should give its response within sixty days of receipt of such a reference but once again the opinion of the statutory body is not binding on the CCI. mergers. However in our view. Thus while the AERA and the CCI each has its own relevance and importance. it should also be mandatory on any sectoral regulator. 5 years of flight experience may be a misnomer since the air carrier may be in service for five years but may have flown far less flight hours than required to ensure safe operations. slots of the airlines being taken over should be redistributed. To recapitulate. This report has clearly shown that in the case of mergers. acquisitions or a case concerning abuse of dominance including predatory pricing.Competition Issues in the Air Transport Sector in India the minimum fleet requirement may be a larger barrier to entry than the 5 years of minimum flight experience. In addition. Within the existing policy. etc. there is a certain formal relationship laid down in the context of requirement of abstention of AERA from cases within the purview of CCI as described above. there is no binding on CCI to consult or refer to the AERA. Ability of an airline to retain the slots and ground services of a competitor that it has taken over. including the AERA. landing slots. the airlines that takes over the aircraft pursuant to the mergers/take over/sale/transfer is allowed the use of airport infrastructure including parking bays. Since slots have acquired quasi property status. However it will not abjudicate any dispute which falls within the purview of the Competition Act 2002. The CCI may like to examine this issue particularly the minimum fleet requirement of 20 aircrafts. Since slots are allotted twice a year in accordance with the slot allocation policy. allowing the airlines that is acquiring/merging with another airlines to take control of the slots of the latter is in fact strengthening dominance. The Competition Act 2002 in Sections 21 and 21A. ____________________________________________________asci research and consultancy 124 .

Therefore the activities of the federation should be monitored by the Competition Commission to see that the forum is not misused to discuss price fixing (fixing price. aviation protocols among others with an overall objective of safety & growth in the Indian aviation sector.Competition Issues in the Air Transport Sector in India Industry Associations: The Federation of Indian Airlines (FIA) is an apex industry body which has been formed by the scheduled carriers in India to discuss a collaborative growth-agenda for the industry and focus on interairline cooperation across different issues. ____________________________________________________asci research and consultancy 125 . government departments and other key stake-holders and provides a platform for consensus building amongst the member carriers. FIA. The Commission can consider making it mandatory for the association to inform CCI about its activities. minimum price. ATF prices. states that it works to identify and take up issues on behalf of the industry. limiting supply. ground services. market sharing. with various regulatory authorities. passenger amenities. An organization like FIA is providing a forum for the members to come together. All major airlines are members of FIA. etc. maximum price). The focus for FIA and its activities is safety.

The slot policy in airlines sector has been discussed in detail in the study. In particular. space etc reveals the following: . The latter was done through detailed analysis of concentration ratios across selected routes and slots owned by the airlines. and parallel airports are issues that are discussed in detail. While discussing the competition issues in airports. On the Delhi-Mumbai route. Thus.primarily the Competition Act. The study covered competition issues relating to airlines as well as airports.in order to arrive at implications for Competition Policy and Law. The study made every attempt to link the competition scenario in the sector to the Competition Policy and Law by linking the market-related issues of concentration. The issue of cartels has also been studied in terms of the domestic scenario as well as selected international cases. selected suggestions for advocacy have been provided. post merger. Implications of the state of competition and anti-competitive practices adopted in the sector were studied in the context of the existing Competition Policy and the Competition Law. The issue of competition in airports has also been studied in considerable detail. Assessment of degree of competition on the relevant market. to link aspects of Competition Policy and Law and derive implications for both in the context of this sector. it has not been able to successfully leverage these into a profitable position due to a variety of reasons.as well as from an operational point of view-in terms of a detailed study of slot arrangements and allocation of slots to individual carriers at six metropolitan airports in the country. both from a policy point of view-in terms of the different types of arrangements being adopted in India for creation and operation of airports. In the peak period therefore. However. The issue of competition was also studied at the level of airports. An analysis of market shares in terms of share of slots airline wise in the pre. the ROFR. barriers to entry.Computation of the HHI shows a trend towards enhanced concentration on the relevant market. Also the issue of regulation vs competition in the airport sector and the relationship between the CCI and AERA is discussed in some detail. There are a large number of airlines flying on these routes. by Jet and Kingfisher followed by Indian in some sectors. In particular an attempt has been made in this study.and post-merger scenario shows that Jet and Kingfisher are controlling a major share of slots. primarily three selected routes. the consumer has limited choice. On the basis of the conclusions arrived at in the study.Competition Issues in the Air Transport Sector in India Conclusions and Recommendations The study provides a detailed analysis of the nature and degree of competition prevailing in the passenger segment of the domestic air transport sector in India. the study analysed the concept of the relevant market and assessed the degree of competition in the relevant markets. However. a few key conclusions are being summarized here: 1. Starting from an over view of the industry and patterns of growth. While it is not possible to go into the details of the conclusions arrived at in the specific sections of the study given its vast scope. in terms of key features such as time slots. Further. especially in the peak period. It was already high in Delhi-Chennai and Bangalore-Chennai routes. slots. specific features and sections of the Competition Policy were studied in the context of the existing market scenario in the sector. it is high enough to cause concern especially in the post merger period. barriers to entry etc to the Domestic Air Transport Policy and the Competition Act. Indian appears to be losing out in the current scenario. both regulatory as well as private barriers to entry were analysed and implications derived there from. there is an obvious control of major slots. ____________________________________________________asci research and consultancy 126 . and suggestions were made for Policy. It is interesting to note in this context that Indian being the incumbent player in the industry had advantages in terms of slots and access to infrastructure. the implications of the findings of the study for Competition Law have also been discussed at length.

the morning and evening peaks generally ranged between 600 to 1000 hrs and 1600 to 2200 hrs. At Mumbai and New Delhi.173 million. most air carriers were allotted between 1 and 5 slots during both the peak and off peak hours of the day. especially Deccan carried many more passengers as a percent of all volume in relation to the percent slots allotted.9%.Competition Issues in the Air Transport Sector in India Similar conclusions are reached on the basis of a comprehensive analysis with regard to the slots allotted to 9 air carriers at the 6 metropolitan airports of New Delhi. Mumbai. varied to a certain extent. However. Mumbai carried the most passenger traffic at 4.003 million. Kolkata. In general. 2. the morning peak period ranged between 600 and 1000 hrs where about 28% (160 slots) of total daily slots were allotted. as computed for individual carriers. Indian and Jetlite . Kolkata and Hyderabad carried the lowest volumes of 2. which some air carriers may have obtained.4%.295. The minimum traffic carried for the 6 airports was during the month of July 2006 with a volume of 1. Amongst the 6 airports.were allotted 57% of all the slots allocated to all the air carriers including these 3 operators. and 11. These 3 operators were generally followed by Jetlite and Deccan. Bangalore and Hyderabad . Thus it is noted that: • • • The slot allocation at the 6 metropolitan airports combined showed that the three of eight air carriers analyzed .033 million and 2. 18. The remaining air carriers.Jet Airways.766. A comparative analysis for the 6 metropolitan airports showed that Kingfisher. when the 6 metropolitan airports are considered.8%. Deccan and Kingfisher carried 27.220.M. and New Delhi. Among the 8 air carriers. Chennai. The slot allocation by the time of the day varied from one airport to the other. Indian and Jetlite continue to hold not only the maximum number of slots during a day but also the most during both morning and evening peak periods. This time series analysis helps to recognize that Jet Airways.498 while December 2006 featured the maximum passenger volume of 1. Indian and Jet Airways dominated at all the airports except for Kolkata and Bangalore where Deccan and Kingfisher respectively followed Jet Airways. Jet Airways and Indian were also the predominant carriers that operated from Hyderabad. Spice Jet and Go Air had an advantage with regard to percent slots allotted as compared with the passengers carried during 2006-07. A review of the percent slots allotted showed that approximately one-third of all the slots allotted to each carrier individually was during the 4 peak hours of the day (morning and evening). The monthly traffic analysis showed that passenger volumes were more or less uniform through out the April 2006 to March 2007 time period.9% of passenger traffic at these 6 airports. slots allocation is predominately during the morning and evening peak periods. The morning and evening peak period analysis indicated that. 15. Spice Jet (26%) had the lowest number of slots during its 4 peak hours of operation.407. Mumbai. Slot allocation analysis by the time of the day suggested that Jet Airways was allotted the maximum number of slots during both the morning and evening peak hours of 6 to 7 A. The evening peak period stretched between 1600 and 2200 hrs with about 38% (213 slots) of total daily slots allocated during this time frame. Indian. Chennai and Kolkata and to some extent at Bangalore.028 followed by New Delhi with 4.M respectively with 16 and 17 slots respectively. especially between these two city-pair combinations.602. Passenger share analysis for the 6 airports combined showed that Jet Airways. The Passenger share for individual airports. Hyderabad and Kolkata relatively more ‘peaking‘ during the morning and evening hours when compared with the remaining airports. • • • • • • • • • ____________________________________________________asci research and consultancy 127 .041. The slot distribution of air carriers for the 30 city-pair combinations illustrates a varying trend in terms of slots allotted at airports such as Hyderabad. Chennai. In essence Jet Airways carried the highest load as a percentage of the passenger traffic at the 6 metros. and 5 to 6 P. Percent slots allotted and percent passenger load were computed to draw comparisons with regard to the slot advantage. the slot allocation occurred through out the course of the day.

Air India. the lower the rate. except for Hyderabad. The AERA Act is discussed and analysed. At a later stage. had more percent slots than the passenger loads. The features of the concession agreements in the airport sector are discussed in detail. Alternatively. the greater the advantage over other air carriers. The number of slots allotted to individual air carriers for one million passengers carried was computed. and 33 slots per million passengers respectively speaks to the advantage these air carriers had over others. It is worth noting that the dominant market shares of Jet and Kingfisher in terms of market share as well as share of slots as indicated above. with a unit rate of 115 slots per million passengers carried. It may be noted that the higher the number of slots per million passengers carried. had a considerable advantage over all other air carriers. Spice Jet. Jet Airways followed with 49. Kolkata and Bangalore. It analyses in details the linkages between the airlines and airports in the context of competition. and Air India exhibited a similar phenomenon wherein they carried more passengers than their slot allocation share. Alternatively an air carrier such as Go Air which had only 18 slots per million passengers shows the utlization and. Jetlite had fewer allotted slots compared with passengers carried. 34. The analysis had shown the corelation of 0.88 indicating that an extremely strong and positive relationship exists between the number of available slots and passengers carried. ____________________________________________________asci research and consultancy 128 . it is noticed that while Deccan has no flights on this sector Kingfisher now has two flights. the better the utilization rate of allotted slots. Except for Mumbai and Chennai. the ROFR and the issue of parallel airports are discussed in detail in the report. Thus it is understandable as to why air carriers choose to make use of any and all available slots while trying to obtain more. In 2008. and to some extent Spice Jet. Further analysis for individual air carriers was performed to identify the specific airports at which the carriers had a slot share advantage over passengers carried. In terms of competition issues in the context of airports two issues that are especially emphasized are the need for inter-airport competition and the issue of regulation vs competition in airports. post merger of Kingfisher and Deccan. Jetlite. given the tendency of enhanced concentration on this market. pre merger. Kingfisher was not on the market while Deccan had a 22. Mumbai and New Delhi but had carried more passengers at Chennai. Deccan had out performed by consistently carrying many more passengers than the percent slots allotted to it. along the Delhi-Chennai sector. Indian.Competition Issues in the Air Transport Sector in India • • • • The slot share versus passenger share analysis for the 6 airports taken individually showed a similar trend wherein at most airports Kingfisher. alongside with price parallelism may indicate a tendency for price collusion. this may lead to overpricing. Spice jet. implicitly. Go Air. In the context of regulation vs competition the role of CCI and AERA and their relationship is discussed. Jet Airways. In the context of inter-airport competition. the efficiency of operations. the utilization of available aircraft capacity should be considered. This may be safely assumed to have implications for price especially since Deccan is a low cost carrier and Kingfisher is a full cost carrier. In addition to the slot utilization. Go Air had a mixed position wherein it had more slots at Hyderabad. Airports The study assesses in detail the issue of competition in airports. Deccan was removed from the market and the time slots have been obviously taken over by Kingfisher. had more slots allotted than the passenger load. Kingfisher had a distinct advantage of consistently being in possession of more slots in relation to the passengers carried. Lastly a co-relation analysis was completed to understand the possibility that more slots available to an air carrier may mean a competitive advantage over others.6% market share. Thus as a result of the merger. For example. The unit rate computations for the 6 airports taken individually a common trend wherein Air India had a considerable advantage over other air carriers while Go Air Kingfisher and Indian had better utilization rates.

for some airlines like Indian. -Shares of Jet and Kingfisher in the total number of slots are increasing post merger. data such as: • Flight-wise passengers carried • Type of Aircraft used for each flight • Flight-wise Passenger Load Factor • Route-wise Revenue • Cost of Operation • Operating Margins • Fuel Costs as a percentage of total cost • Taxes and Surcharges collected per flight • Number of aircrafts owned and leased For Airports the following data may be made available: • Number of flights taking off and landing • Number of Slots available at each airport • Procedure of calculation of the capacity of the airport. The above data are not available currently in a systematic framework. The share of Indian is coming down. This limits competition and CCI may like to monitor this issue.g. In keeping with the above observations. the following issues emerge and may be taken note of by the CCI:-Post merger. this is a critical factor in terms of limiting competition. This may not be termed as price collusion. -Possibility of a failing business looms large in this sector due to rising fuel prices and intense price competition. In the context of the spate of mergers taking place on the market. this factor bears significance. on a regular basis. -Mergers show indication of removal of a vigorous competitor from the market e. there is a definite trend towards enhanced market concentration on all three selected routes. Particularly in the case of the public sector owned airlines. in the case of Jet and Sahara on Delhi-Mumbai and Delhi-Chennai routes. -However mergers have benefits in terms of increased efficiency. The issue of increasing concentration in the post merger scenario may be taken note of by the CCI. It is suggested that the reports and data which are to be mandatorily submitted to the office of the DGCA should be in a standard format.Competition Issues in the Air Transport Sector in India Recommendations From this comprehensive study. It is obviously losing market share to the private players. Thus for example. the following issues may be outlined for advocacy: As far as the Competition Policy is concerned. economies of scale etc. -The market is oligopolistic. -There is some evidence of price parallelism. While there are a large number of players on the market. flight-wise ____________________________________________________asci research and consultancy 129 . in accordance with Article 49(1) of the Act. However. This is an important issue. the CCI may give an opinion to the Government on the following issues: Data Deficiency: CCI may take an initiative to ensure data availability in the following areas: It is suggested that airlines may be asked to submit. CCI may monitor the pricing of the dominant airlines in particular. three players control a major share of the market in terms of share of slots as well as share of total passenger traffic.

requirements for flying internationally and mergers. ____________________________________________________asci research and consultancy 130 . information is We also suggest that there should be a single nodal agency for collecting and collating the data. CCI may take note of these. Industry Associations It has been discussed that the activities of the FIA should be monitored by the CCI in order to see that the FIA is not misused to discuss issues of an anti-competitive nature. We also find that for an effective strategy on competition. route wise analysis is not being conducted/made available. Legal Aspects: These issues have been discussed in detail in an earlier section. It is important to have comparable time series data relating to the sector. This is because these affect inter-airport competition and may have an adverse impact on competition among airports and thus on the airlines sector. Currently there are three agencies which have the requisite data. Ministry of Civil Aviation and the Airports Authority of India. namely.Competition Issues in the Air Transport Sector in India information is available. For airports specific recommendations for advocacy regarding the role of AERA have been discussed in the earlier section. This study would therefore recommend that ROFR and not allowing a second airport to be developed within 150 kms of the existing airport may be examined by the CCI. While data analysis at an aggregate level is being done by some of the agencies. detailed route wise analysis requires to be done. while for others like Kingfisher only route-wise passenger available. equity and fleet requirements. DGCA. Further it has been discussed that ROFR and the issue of parallel airports involve competition issues. In regard to the airlines sector specific suggestions for advocacy have been made for the route dispersal guidelines. We recommend that the CCI can make it mandatory for FIA to inform the CCI about its activities.

1. 1997. “Mergers and alliances in civil aviation – an overview of the current enforcement practices of the ECA concerning market definition. “Competition Assessment Framework . Nicoletti.htm Department of International Development (DFID). Asian Development Bank & OECD Development Centre Gonenc R and G. 2007. Economics Department Working Papers No. 11. “India's Airlines Find that Fast Growth Has Its Ups and Downs”. 254 India Knowledge @ Warton. Nancy Shah.. Reports of Aviation Centre of Excellence Reports of Centre for Asia Pacific Aviation (CAPA) Report of the European Competition Authorities Air Traffic Working Group. Vol. competition assessment and remedies” ____________________________________________________asci research and consultancy 131 . Government of India and Hyderabad International Airport Limited.nic. “On the Right of First Refusal”. “The Opportunities and Threats of Turning Airports into Hubs”.S. Market Structure And Performance In Air Passenger Transportation”. Mehta. Operation and Maintenance of the Hyderabad International Airport between Ministry of Civil Aviation. Article 4. CCI. No.05.ft. 2004. 2007. 2007. 1999. “ Competition Policy and International Airport Services” Policy Roundtables. OECD. Study Oaoer. Advances in Theoretical Economics Vol 5(1). S. Construction. “Airline cartel fines could be better used”. Domestic Air Transport Policy. Directorate General of Civil Aviation. 2007. “Regulation. A and B. Findlay. http://www.R 2005 . 2003.com/ OECD. Construction.A. A and C. Government of India and Bangalore International Airport Limited.in Kraus. Journal of Air Transportation. “Liberalisation And Foreign Direct Investment In Asian Transport Systems: The Case Of Aviation”. Koch. 2008.Competition Issues in the Air Transport Sector in India References Annual Reports of Directorate General of Civil Aviation Annual Report of Jet Airways for 2005-06 ASSOCHAM. http://civilaviation. Financial Times. 2000. Concession Agreement for the Development. http://www. Concession Agreement for the Development. P. 2004. Operation and Maintenance of the Bangalore International Airport between Ministry of Civil Aviation. Ryan. “Indian Civil Aviation Industry: Road Map for Growth” in association with ErnstYoung. Bhikchandani. Lippman S.6. ‘Competition Issues in the Civil Aviation Sector’.in/moca/DTPolicyRevised28.An operational guide for identifying barriers to competition in developing countries” Goldstein.ikw.

D.headlinesindia. 1998.infrastructure.indiainbusiness. “Aviation Industry in India .com/articles/ap/2007/06/02/business/AS-FIN-COM-India-Kingfisher-Airlines. “Mobilising Private Investment in Airport Development In India” CRISIL Limited Shah.gov.org. Directorate General of Civil Aviation.Challenges for the Low Cost Carriers” Singh R. www.” Rethinking Right of First Refusal”. 2002”. S.cci. The Airports Economic Regulatory Authority Of India Bill. *********** ____________________________________________________asci research and consultancy 132 .business. Government of India. 2005.aero/news/ http://jaminthesky.in Sharma.html. www.htm http://www. 2007. 2006.iht.centreforaviation.nic.com/industries/aviation.Evaluating Competition related issues pertaining to the Indian Airlines’ Industry. Harvard Law School. 2007 http://www.php) http://www. with Special Reference to M&A in light of Competition Act. Discussion Paper. Sinha. http://indiaaviation. The Secretariat for the Committee on Infrastructure.com/aviation/Press_Releases_%26_Speeches/ Press_Releases/Mallya%3A_Kingfisher-Deccan_merger_a_seminal_event_for_ Indian_industry/ Walker. The Air Corporations Act. a study paper submitted Competition Commission of India.financialexpress. 1953. “Competition Issues in the Civil Aviation Sector .in. N.Competition Issues in the Air Transport Sector in India Report of the Task Force. Planning Commission. “Financing Plan for Airports”. “Teeter-Totter of Regulation and Competition: Why Indian Competition Authority must Trump Sectoral Regulators”.com/category/alliances-ma/ http://www. S K.in/industry-infrastructure/infrastructure/civil-aviation.com/news/Kingfisher-Deccan-merger-takes-off/206679 http://www.

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